Sajjan Bank v UOI

•Unconstitutionality of s.22(1) as it restricts their trade and business and in effect confers an
arbitrary power in the RBI to either grant or refuse a license, which is a permit to do business?
•The intention behind establishing the RBI was to foster banking business and not impede their
growth.
•This power is regulated by the statute and is entrusted to a statutory body which itself regulates
credit of the country.
•The nature of the power, its exercise after the investigation prescribed by the statute invests it
with a quasi-judicial character and such power cannot be said to be arbitrary as all those
remedies available such as appeal, insistence on reasons for refusal, an opportunity to be heard
and the like are granted which is not the case with permits. Therefore, the license under s.22(1)
is not a permit but a mere license granted for genuine banking institutions to run on sound lines
of judicial character.
•Harishankar Bhagla v State of Madhya Pradesh: Legislature must declare the policy and provide
a standard to guide the officials or the body in power to execute the law
•Refusal of license under s.22 does not amount to stoppage of business. The essence of banking is
the opening of current account and the enabling of the constituent to draw by cheques.
Refusal of license would only entail a loss of this type of business. But it could carry on
business as money-lenders.
•The determination whether the conditions required to be fulfilled before granting of license are
within the competence of the RBI, an expert statutory body, with the legislature having
prescribed the nature of real banking institutions in this country, this power would not
amount to excessive delegation.
Was the nationalization of banks a right move?

§ NPA crisis since 2012 is at least partly explained by the credit bubble that grew
under political patronage that emerged out of government's control over Banks.
§ Nationalization of banks led to an interest rate structure that was incredibly
complex.
o There were different rates of interest for different types of loans. The
Indian central bank eventually ended up managing hundreds of interest
rates.
o This defeated the purpose of nationalization, as due to complex
structure loans never reach the needy ones.
§ Banking is a highly competitive enterprise which works on profits, nationalization
of banks has led to lesser competition between the public sector and private sectors
banks.
o This has created a bureaucratic attitude in the functioning of the
banking system.
 o Lack of responsibility and initiative, red-tapism, inordinate delays are
common features of nationalized banks.
§ Although liberal credit policy is necessary for providing financial support to the
weaker sections of the rural community, such a policy may prove harmful for the
stability of the banking system.
o The experience of the nationalized banks has shown that these banks are now
facing the problems of heavy overdue loans and economically unviable
branches.
o Extending loans to agriculture and small scale industries is risky and less
remunerative. Such loans are against the sound banking rules and may weaken
the economic viability of these institutions.
§ Due to lack of performance audit of banks, policy-making failed to ensure that the
finance from the public institutions are, in fact, going to productive uses in the large
public interest
Given the significance of a vibrant banking system in the growth story of the nation, privatisation
of banks is proposed. However, privatisation of banks is not a panacea. India must not make haste
in going for the privatisation of banks, rather it must focus on comprehensive governance reforms,
resolution of NPAs and creating a free market so that investment can be reinvigorated and wheels
of the economy can again get back on track.

The following points highlight the nine major problems faced by India’s nationalized
banks.
Problem # 1. Losses in Rural Branches:
Most of the rural branches are running at a loss because of high overheads and prevalence of the
barter system in most parts of rural India.

Problem # 2. Large Over-Dues:

The small branches of commercial banks are now faced with a new problem—a large amount of
overdue advances to farmers. The decision of the former National Front Government to waive all
loans to farmers up to the value of Rs. 10,000 crores has added to the plight of such banks.

Problem # 3. Non-Performing Assets:

The commercial banks at present do not have any machinery to ensure that their loans and
advances are, in fact, going into productive use in the larger public interest. Due to a high
proportion of non-performing assets or outstanding due to banks from borrowers they are
incurring huge losses. Most of them are also unable to maintain capital adequacy ratio.

Problem # 4. Advance to Priority Sector:

As far as advances to the priority sectors are concerned, the progress has been slow. This is
partly attributable to the fact that the bank officials from top to bottom could not accept
nationalisation gracefully, viz., diversion of a certain portion of resources to the top priority and
hitherto neglected sectors. This is also attributable to the poor and unsatisfactory loan recovery
rates from the agricultural and small sectors.

Problem # 5. Competition from Non-Banking Financial Institution:

As far as deposit mobilisation is concerned, commercial banks have been facing stiff challenges
from non-banking financial intermediaries such as mutual funds, housing finance corporations,
leasing and investment companies. All these institutions compete closely with commercial banks
in attracting public deposits and offer higher rates of interest than are paid by commercial banks.

Problem # 6. Competition with Foreign Banks:

Foreign banks and the smaller private sector banks have registered higher increase in deposits.
One reason seems to be that non-nationalised banks offer betters customer service. This creates
the impression that a diversion of deposits from the nationalised banks to other banks has
probably taken place.

Problem # 7. Gap between Promise and Performance:

One major weakness of the nationalised banking system in India is its failure to sustain the
desired credit pattern and fill in credit gaps in different sectors. Even though there has been a
reorientation of bank objectives, the bank staff has remained virtually static and the bank
procedures and practices have continued to remain old and outmoded.

The post-nationalisation period has seen a widening gap between promise and performance. The
main reason seems to be the failure of the bank staff to appreciate the new work philosophy and
new social objectives.

As Asha Kant has commented:

“Area approach, agricultural development branches, village adoption plans, etc., will be of little
avail, if the grass-root level staff are not imbued with the motive and the vision of bringing about
a silent revolution in the countryside”.

Problem # 8. Bureaucratisation:
Another problem faced by the commercial banks is bureaucratisation of the banking system. This
is indeed the result of nationalisation. The smooth functioning of banks has been hampered by
red-tapism, long delays, lack of initiative and failure to take quick decisions.

Problem # 9. Political Pressures:

The smooth working of nationalised banks has also been hampered by growing political
pressures from the Centre and the States. Nationalised banks often face lots of difficulties due to
various political pressures. Such pressures are created in the selection of personnel and grant of
loans to particular parties without considering their creditworthiness.
What is the extent and effect of the NPA problem in India?
Banks give loans and advances to borrowers. Based on the performance of the loan, it may be
categorized as: (i) a standard asset (a loan where the borrower is making regular repayments), or
(ii) a non-performing asset. NPAs are loans and advances where the borrower has stopped making
interest or principal repayments for over 90 days.
As of March 31, 2018, provisional estimates suggest that the total volume of gross NPAs in the
economy stands at Rs 10.35 lakh crore. About 85% of these NPAs are from loans and advances of
public sector banks. For instance, NPAs in the State Bank of India are worth Rs 2.23 lakh crore.
In the last few years, gross NPAs of banks (as a percentage of total loans) have increased from
2.3% of total loans in 2008 to 9.3% in 2017 (Figure 1). This indicates that an increasing proportion
of a bank’s assets have ceased to generate income for the bank, lowering the bank’s profitability
and its ability to grant further credit.
Escalating NPAs require a bank to make higher provisions for losses in their books. The banks set
aside more funds to pay for anticipated future losses; and this, along with several structural issues,
leads to low profitability. Profitability of a bank is measured by its Return on Assets (RoA), which
is the ratio of the bank’s net profits to its net assets. Banks have witnessed a decline in their
profitability in the last few years (Figure 2), making them vulnerable to adverse economic shocks
and consequently putting consumer deposits at risk.

IMPACT OF NPA ON BANKS

• LIQUIDITY POSITION
If the bank evaluates less capital the future business concern, which affects the position of banks
and creating a mismatch between the assets and liability and they force the bank to raise the
resources at a high rate. So, there will be an impact on the profitability of banks, were they not
able to recover the amount from the borrower the level of profits will come down.
• UNDERMINE BANK’S IMAGE
Increase in non-performing assets which shadows the domestic markets and global level markets,
on that situation the bank profitability decreases which lead to the bad image to banks.
• EFFECT ON FUNDING
Increase in non-performing assets leads to scarcity in funding to other borrowers. As well as the
Indian capital market also get affected. And then there will be only a few banking institutions lend
money.
• HIGHER COST OF CAPITAL
It shall result in increasing the cost of capital as banks will now have to keep aside more funds for
smooth operations.
 • HIGH RISK
High on non-performing assets, low profitability, high risk in business and work against the bank
and may take the two circumstances survival of the bank. And it affects the risk-bearing capacity
of the bank.
• BANK PROFITABILITY
The which makes low profits have lower capital adequacy ratio and the low capital ratio which
limits the further creation of assets. Such kind of banks face difficulties in their growth, expansion,
and plans and there they need not wherewithal to march boldly on these fronts. In these growth
failures in the expansion, the only consequences and stagnation and negative growth.
• They reduce net interest income as they do not charge the interest to these accounts.
• Servicing non-performing assets need to be prudentially provided for. This will again lead
to reduced profitability.
Impact on NPAs on Banks
The increasing NPAs not only reduce the profitability of banks but also affect its credibility. In
fact the massive amount of NPAs with commercial banks is threatening to erode half of the capital
base of public sector banks.
Once a bank started incurring losses and if the fundamentals are not corrected, the problem may
become chronic and destabilize the confidence of the depositors. Once the depositors start
withdrawing their money from the banks, the banking system will collapse. It is because of this
reason that NPAs must always remain within the sustainable limit and the current level of NPAs
is threatening the stability.
Higher amount of NPAs also pressurise banks to decrease the interest rate on saving deposits to
increase the margin. Already there is a gap between interest rate on bank savings vis-a-vis savings
in other non-banking accounts like PPF, post office saving schemes etc. Further, several mutual
funds are providing returns of more than 10%. Further diversion in interest rates will divert the
funds from banking sector to non-banking sector further eroding the capital with banks.
Thus, the increasing NPAs pose long-term threats to the stability of banking sector.
Impact on Indian Economy
Strong banking sector is one of the most significant prerequisite of strong economy because it
channels the savings into the investment. A fragile banking sector will ultimately give way to the
fragile economy.
The major sectors of the Indian economy contributing to the NPAs are as under
It is clear that infrastructure accounted for biggest chunk of NPAs. Because of massive amount of
NPA in infrastructure, the banks are now reluctant to fund this sector. As the infrastructure is one
of the most important sectors in economy which fuels the growth of other sectors, draining of
resources to infrastructure may hamper the growth of Indian economy.
Among the other sectors, food processing also accounted for 5.3% of total NPAs. Food processing
is one of the most employment intensive industries and its growth also pushes the growth of
agriculture. Any loss to the food processing industry will ultimately percolate to the employment
as well as agriculture sector.
Other sectors will also directly or indirectly affect the overall economic scenario due to the
exposure to the bad loans. Hence, the issue of NPA must be resolved on urgent basis.

NPA - Impact
The problem of NPAs in the Indian banking system is one of the foremost and the most
formidable problems that had impact the entire banking system. Higher NPA ratio trembles the
confidence of investors, depositors, lenders etc. It also causes poor recycling of funds, which in
turn will have deleterious effect on the deployment of credit. The non-recovery of loans effects
not only further availability of credit but also financial soundness of the banks.
Profitability: NPAs put detrimental impact on the profitability as banks stop to earn income on
one hand and attract higher provisioning compared to standard assets on the other hand. On an
average, banks are providing around 25% to 30% additional provision on incremental
NPAs which has direct bearing on the profitability of the banks.
Asset (Credit) contraction: The increased NPAs put pressure on recycling of funds and reduces
the ability of banks for lending more and thus results in lesser interest income. It contracts the
money stock which may lead to economic slowdown.
Liability Management: In the light of high NPAs, Banks tend to lower the interest rates on
deposits on one hand and likely to levy higher interest rates on advances to sustain NIM. This
may become hurdle in smooth financial intermediation process and hampers banks’ business as
well as economic growth.
Capital Adequacy: As per Basel norms, banks are required to maintain adequate capital on risk-
weighted assets on an ongoing basis. Every increase in NPA level adds to risk weighted assets
which warrant the banks to shore up their capital base further. Capital has a price tagranging
from 12% to 18% since it is a scarce resource.
Shareholders’ confidence: Normally, shareholders are interested to enhance value of their
investments through higher dividends and market capitalization which is possible only when the
bank posts significant profits through improved business. The increased NPA level is likely to
have adverse impact on the bank business as well as profitability thereby the shareholders do not
receive a market return on their capital and sometimes it may erode their value of investments.
As per extant guidelines, banks whose Net NPA level is 5% & above are
required to take prior permission from RBI to declare dividend and also stipulate cap on dividend
payout.
Public confidence: Credibility of banking system is also affected greatly due to higher level
NPAs because it shakes the confidence of general public in the soundness of the banking system.
The increased NPAs may pose liquidity issues which is likely to lead run on bank by
depositors. Thus, the increased incidence of NPAs not only affects the performance of the banks
but also affect the economy as a whole. In a nutshell, the high incidence of NPA has cascading
impact on all important financial ratios of the banks viz., Net Interest Margin, Return on Assets,
Profitability, Dividend Payout, Provision coverage ratio, Credit contraction etc., which may
likely to erode the value of all stakeholders including Shareholders, Depositors, Borrowers,
Employees and public at large.

OMBUDSMAN SCHEME:

Salient features of the Integrated Ombudsman Scheme are:

i. It will no longer be necessary for a complainant to identify under which scheme he/she
should file complaint with the Ombudsman.
ii. The Scheme defines ‘deficiency in service’ as the ground for filing a complaint, with a
specified list of exclusions. Therefore, the complaints would no longer be rejected simply
on account of “not covered under the grounds listed in the scheme”.
iii. The Scheme has done away with the jurisdiction of each ombudsman office.
iv. A Centralised Receipt and Processing Centre has been set up at RBI, Chandigarh for
receipt and initial processing of physical and email complaints in any language.
v. The responsibility of representing the Regulated Entity and furnishing information in
respect of complaints filed by customers against the Regulated Entity would be that of
the Principal Nodal Officer in the rank of a General Manager in a Public Sector Bank or
equivalent.
vi. The Regulated Entity will not have the right to appeal in cases where an Award is issued
by the ombudsman against it for not furnishing satisfactory and timely
information/documents.
In order to ensure speedy resolution of customer grievances against regulated entities (REs), RBI
brought about Reserve Bank – Integrated Ombudsman Scheme (RB-IOS) – 2021 as single point
resolution mechanism. Since it is steered by RBI, all REs are conscious about compliance standards.
With greater connect of the formal banking system with masses under financial inclusion scheme and
increased digitalization of financial system, it is necessary to institutionalize a progressively effective
grievances redressal mechanism to infuse greater confidence among users and to protect them from
procedural delays, digital hindrances and lack of knowledge of operating people. With the increase in
customer base, robust systems have to be developed for development of efficient financial system.

Internal ombudsman (IO) is already institutionalized in REs, where majority of grievances are
resolved at entity level. Normally, REs do not allow escalation of complaints to RB-IOS. Only those
that are not satisfyingly closed by REs get escalated to the integrated ombudsman by customers. This
has improved the speed of disposal of complaints.
Any customer aggrieved by an act or omission of a RE resulting in deficiency in service can file a
complaint under the IOS personally or through an authorized representative as defined under clause
3(1)(c). Such customer should have initially lodged the same complaint to RE and if the complainant
is not satisfied with its decision or if the complaint has remained un-responded by REs for 30 days.
Then only it can be escalated to RB-IOS.

RB-IOS will consider the complaints of customers of REs without any limit on the amount but it
should relate to deficiency in service. There is no cut off of amount to refer a complaint for redressal.
Ombudsman can pass an Award under Clause 15 for any direct perceived loss/consequential loss
suffered by the complainant. A compensation up to Rupees 20 lakh, in addition to, up to Rupees One
lakh for the loss of the complainant’s time, expenses incurred and for harassment/mental anguish
suffered by the complainant can be awarded by the ombudsman depending upon the proven
deficiency of service.

• The big shift:

In a tectonic shift, RBI brought Credit Information Companies (CICs) within the ambit of RB-IOS
much to the relief of large number of small and big borrowers experiencing the difficulties to get
corrections done in the rating information. Neither the banks are prompt in informing the correct
status of servicing of loans nor CICs are meticulous in reflecting correct status of credit information.
Large number of credit cards which have outlived and expired with small debit balances are often
reflected in the records of borrowers impacting the credit rating. Many people have to go back and
forth with CICs to correct the information to get correct rating.

It is the larger vision of RBI that CICs are brought within the range of RB-IOS. Not only that, RBI
mandated that they too need to have an internal ombudsman framework like any other REs to settle
most of the grievances before they are escalated to integrated ombudsman.

Looking to the improved efficiency and fine-tuned turnaround time of grievance redressal of REs, the
scope of RB-IOS has been further broad based. It henceforth will handle all grievances related to
CICs. With increased role of CICs in providing inputs for credit decisions, bringing them under the
ambit of RBI is a far-reaching reform. It will provide much needed cost-free alternative redressal
mechanism for grievances against CICs.

At the same time, CICs will also be made to establish their own internal ombudsman (IO) framework
like other REs. The proposed move shall provide immense relief to millions who experience
downgrades without understanding reasons thus increasing the cost of borrowings from REs.

• Way forward:
By including CICs, the large number of customer grievances against them can be monitored, resolved
and regulated. They will be made conscious about the accurate storage and retrieval of information to
arrive at updated data-based credit rating. Presently, the intending borrower has to approach individual
CIC for correction of their records. They may or may not be responsive. Now their customer
grievances redressal system will be under RBI scanner. The CIC has to resolve the complaints like
any other REs within 30 days failing which, the customer shall approach RB-IOS for resolving their
issues. Though the role of CIC is very important in credit decision making process of REs, there was
no proper institutionalized process of attending to customer grievances. The enlarged ambit of RB-
IOS is a welcome move to provide relief to users of the REs. Way forward, the credit rating will
reflect true and fair view of the borrower – existing and potential.

INEFFCIENCY OF INTEGRATED OMBUDSMAN:

It shows the lack of representation on the ombudsman from the consumer’s point of view results
in the large-scale rejection. the functioning of the ombudsman needs to be reviewed. “The
banking ombudsman has proved to be ineffective. Consumers had received better results through
the consumer forum, albeit with extended timelines. The ombudsman needs to be empowered
and it’s high time that a committee is appointed to review its functioning for it to be effective.
The RBI’s banking ombudsman is a fast, tech-friendly redressal mechanism. However a lot of
the complaints made to it are rejected or dismissed, often on technical grounds. Consumers
should go through the legal provisions of the Ombudsman Scheme before approaching this body
or consult a legal professional. In some cases, traditional remedies like consumer court may be a
better alternative.

Payment settlement scheme

s.25.
Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account.—
(1) Where an electronic funds transfer initiated by a person from an account maintained by him
cannot be executed on the ground that the amount of money standing to the credit of that account
is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid
from that account by an agreement made with a bank, such person shall be deemed to have
committed an offence and shall, without prejudice to any other provisions of this Act, be punished
with imprisonment for a term which may extend to two years, or with fine which may extend to
twice the amount of the electronic funds transfer, or with both:
Provided that nothing contained in this section shall apply unless—
(a) the electronic funds transfer was initiated for payment of any amount of money to another
person for the discharge, in whole or in part, of any debt or other liability;
(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines
issued by the system provider;
(c) the beneficiary makes a demand for the payment of the said amount of money by giving a
notice in writing to the person initiating the electronic funds transfer within thirty days of the
receipt of information by him from the bank concerned regarding the dishonour of the electronic
funds transfer; and
(d) the person initiating the electronic funds transfer fails to make the payment of the said money
to the beneficiary within fifteen days of the receipt of the said notice.
(2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was
initiated for the discharge, in whole or in part, of any debt or other liability.
(3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person,
who initiated the electronic funds transfer through an instruction, authorisation, order or
agreement, did not have reason to believe at the time of such instruction, authorisation, order or
agreement that the credit of his account is insufficient to effect the electronic funds transfer.
(4) The Court shall, in respect of every proceeding under this section, on production of a
communication from the bank denoting the dishonour of electronic funds transfer, presume the
fact of dishonour of such electronic funds transfer, unless and until such fact is disproved. (5) The
provisions of Chapter XVII of the Negotiable Instruments Act, 1881 (26 of 1881) shall apply to
the dishonour of electronic funds transfer to the extent the circumstances admit.
Explanation.—For the purposes of this section, ―debt or other liabilityǁ means a legally
enforceable debt or other liability, as the case may be.
Banking Regulation Act

S.22-
notice of refusing the license to this bank already in existence on the commencement of this
act.
S.37
from this section part -III suspension of business and winding up of business
(1) expert report quintessential containing the assessment of the banking company's financial
health for the bank to go to the court for moratorium. boos- RBI. if the bank gets a
mortarium and the RBI is of the opinion that the bank cannot revive then, winding up
ordered by HC.

Copy of the order by HC to be forwarded by the banking company because the HC lacks
the competence to forward this order to the RBI. because banks wants an intervention that
they are not in a position to pay their debts. and HC lacks the competence to do the same

(2) prefiling of the application. report of the RBI needed to certify that the bank can stabilize
after the moratorium is granted

that if the moratorium is not granted or the court order is in execution it might deplete the
assets of the bank and leave it worse off or the RBI is not responding on time. then these
amount to sufficient reasons and the HC can grant the moratorium ordering the RBI to
submit its report asap. this is irrespective of the HC lacking the financial acumen to do such
an assessment. it provides deference to the bank in such a case and orders the RBI to
submits its report, leaving the final say to the RBI

interest of the banks shouldnt be compromised but at teh same time, the HC is saying that
the report of the bank is necessary in time. the reasons why HC can grant moratorium even
in the absence of a report of the RBI. it could be because of the bank not in a position to
serve a copy of the order on the RBI or the RBI lacking the time to look into this matter
and the bank's situation is so sad taht it is in dire need of teh moratorium and the HC can
pass such an order.

final say in this matter is with the RBI on the basis of the RBI's report the HC can rescind
or pass such other orders as it thinks proper.

(3) like the appointment of a receiver under the SARFAESI, and other acts

(4) switch from suspension to winding up

during the moratorium period, the bank is under the watch of the RBI. moratorium
compulsory for s.37(4). and the bank in the moratorium period, is acting against the
interests of the depositors.
 order of moratorium not required for winding up of banking company. becasue under (1)
the application and the RBI can be submitted at once.

order for winding up is located in 38. 37(4) mein HC can only. order under (1) is moratorium.
order has a limited connotation in s.37(1). even the refusal of granting moratorium also is an
order not so for the purpose of 37(1).
the order is confined to moratorium.
It means stay of all business and stay on any proceedings that have commenced from any
stakeholders

this means moratorium is in existence. and after that the RBI is of the opinion that the
affairs of the bank are detrimental to the interests of its customers. then the Court will not
extend the period of moratorium and initiate winding up procedure.

it provides for RBI to make an application for winding up but not the HC to make an order
for winding up but only that the HC cannot extend the moratorium period any longer than
what is granted.

Section-38: not voluntary winding up

sections of CA not applicable. but the powers of the HC under s.37 are applicable. s.37(1)
would stand. any conflict between provisions of CA and this act, BRA will prevail. it does not
mean that 37(1) should be given inferior attention. this 37(1) will prevail.
how will the HC come to know that the banking co has not been paying its debts?
under 38(1)(b) HC has the power to pass an order for winding up. only under this section
this is in the nature of a report. not a certification. frivilous complaints must not be made to the
HC. therefore, there is a certification by the RBI needed for initiating proceedings for winding
up by the people as mentioned in S.434 of CA. then the creditors or all those people specified
in s.434 taken up the application under 38(1)(a).
no discretion of the HC for appointment of liquidator on its own. central goverenment speicifies
who should be the official liquidator by a gazette notification or the RBI can make a
recommendation for the official liquidator.
if a bank has a number of branches then for that purpose, what is the territoriality of the bank?
the registered office of the bank- that place will be the place of application to high court
when the number of banks wound up is not high, then the central government shall not attached
a court liquidator to the panel of that court
when there is no liquidator attached to the court, then who will be appointed as a liquidator?
then the court has to make an application to the central government for appointment of
liquidator, it cannot it self appoint a liquidator.
the situation that the RBI recommends someone after a while should not be reached, all of this
should be done at the time of the application of winding up only. even otherwise, then this
notwithstanding clause applies and the RBI recommendation should be taken in to account and
the actual person appointed can be sidelined.
for this overriding effect, there should be a conflict between 38A and 39.
only whn the RBi makes a recommendation of to the HIgh Court that they want this person as
teh official liquidator, then s.39 overrides it. othereise the HC appoints any person on teh panel
of liquidators with the HC as a liquidator.
overriding power given to RBI in cases where it only makes an application for winding up.
s.40
hence the arrangement if not successful in the previous section
s.43A
41A read with 43A(5) when the liquidator is preparing his report, the liquidator is mentioning
all the cash there within and the assets which could be readily converted into cash. further
liquidation is envisaged in 43A(5). liqudation of the assets starts at 41A and then again at
43A(5). liquidation starts at 41A. this is only with respect to payment of claimants other than
s.530 claimants. it is for secured and unsecured creditors.
assets are ti be liquidated in cash for the purpose of discharging liability towards the creditors.
when is the asset is to be liquidated? at what juncture? after payment of liability to preferential
payment to stakeholders under 530?
All constitute different class of claimants
5lakh ensured for all depositors under the act
s.44
in case of voluntary winding up who will be appointed as liquidator?
 Rustom Cavasjee Cooper v. Union of India with T.M Gurubuxani v. Union of India

Facts:

o in 1969, the banking companies (acquisition and transfer of undertakings) Ordinance 8 of 1969
was promulgated under the power of article 123(1) of the constitution. It aimed to nationalize
14 private sector banks with base deposit over 50 Cr and vesting their ownership with the
government.
o It also provided that all the undertakings of the would be transferred and vest with the new
banks which were owned by the government. All the assets, rights, powers, authorities,
privileges, movable and immovable properties would be transferred to the new bank for which
the government would be paying compensation. The amount of compensation would be
determined by the government and the banks and if not the same could be referred to a tribunal
to determine the compensation payable in marketable government securities which would
mature in 10 years.
o the banking companies act, 1969 was enacted and was retrospectively applicable. This repealed
the above ordinance and stated that any action taken under the above ordinance inconsistent to
the act would not have any effect.

Petitioners Contentions

o Against the ordinance: it was invalid as the power to promulgate under Article 123(1) has a pre-
condition according to which the president must be the judge to determine if there exist
circumstances grave enough for this.
o the parliament lacked legislative competence to enact both as the subject matter of the act and
the ordinance is partially within the state list.
o Against the act: it violates the fundamental rights of the petitioner given under Articles
14,19(1)f, 19(1)g and 31(2) and freedom of trade under article 301.
o Article 31(2) says that compensation means ‘just equivalent’ in money of the property acquired
just equivalent” in money of the property acquired and here the government has failed to
provide relevant factors for determining such just compensation. This has reduced the
petitioner’s value of investment.
o the act giving retrospective effect is ineffective has there was no valid ordinance in existence
and the provisions within it which validate the infringement of the FR’s of the petitioners is
not within the competence of the parliament.
o They vest the undertaking of the named banks in the new corporations without a public purpose
and lacks the setting of principles and basis for determination of payment.

Contentions of the respondent

o Contended that the petitions were not maintainable as the petitioners were mere directors,
shareholders and holders of deposits or current accounts but were not the owners of the
company or the property being sought to be nationalized as a company is a legal person and is
separate and distinct from its individual members thus their FR’s were not infringed as the
company is not a property of the shareholders.
o the condition of satisfaction of the president is subjective and the government is under no
obligation to disclose any such reasons for the necessity of the ordinance promulgated.
o the parliament is well within its rights as entry 45 of list I of the 7 schedule is banking and
th

entry 42 of list III is acquisition and requisitioning of property.

o the compensation under article 31(2) does not state just equivalent and the courts do not have
the power to determine adequacy or reasonableness of such compensation.

Decision of the court

o the petitioners would not fail on the ground of maintainability as they had challenged the
infringement of their own rights and not of the bank of which they were the shareholders and
directors of. Held that an executive or legislative measure may impair the rights not only of the
Company but also of its shareholders and the court could grant relief if the State action impaired
the right of the shareholders as well as of the Company.
o Said that since the ordinance has been repealed by the act the question of its validity is now
academic meaning it has no practical applicability and thus will not delve into it.
o Overheld the mutual exclusivity theory and laid the effect test stating that the court would now
look into the effect of the impugned act rather than the object.
o Article 31(2) placed two major restrictions on the power of the State to acquire private property:
first, such acquisition had to be for a public purpose and, secondly, compensation had to be
paid for them. In this case the court observed that the Acquisition Act, instead of valuing the
entire undertaking as provided for determination of the value of only some of the components,
that constituted the undertaking. In the courts view, it was an important principle of valuation
that the acquired property be valued as a unit, and not as an aggregate of different components
constituting this unit. They felt that the Acquisition Act was liable to be struck down purely on
this ground. Thus, violates the guarantee of compensation under article 31(2) by determining
the compensation using methods which are not relevant for doing so and such amount
determined cannot be regarded as compensation.
o the court stated that the act makes a hostile discrimination against the named banks as it prohibits
them from carrying on business while other banks both Indian and foreign banks were allowed
to carry business and even permitted new banks to be formed which may engage in the banking
business. Thus, restricts the named banks from carrying on business other than banking as
defined under section 5(b) of the enacted banking regulation act of 1969. Thus, violating
Article 14.
o the act did not infringe article 19(f) as the state can always create a partial or absolute monopoly.
o the court upheld the right of the union and state to nationalize banks or any other industry.
Stating that disproportionate compensation would not be a ground for repealing the act and
directed the government to grant fair indemnification to the aggrieved parties.

Dissent
• Held that the Ordinance promulgation power vested within the President of India is a
subjective power that cannot be challenged in the courts.
• Rejected the majority’s opinion that the shareholder can approach the apex court for the
violation of his rights which were directed against a company i.e. a non-citizen.
• Affirmed the mutual exclusivity theory as was propounded in Gopalan judgment.
• Agreed with the majority on two points: the act is not in violation of the article 19(f) and
the parliament did have the legislative competence to enact the act.

Sajjan Bank (Private) Ltd v Reserve Bank of India, Madras, AIR 1961 Mad 8, 1960 30
CompCas 146 Mad

Facts:
o Sajjan and Co. Ltd was incorporated in 1944 with the object of carrying on money lending
business and in 1946, it was converted into a banking company and the name was changed to
Sajjan Bank (private) Ltd.
o the banking companies act came into force in 1949. Under Section 22 of the same the banking
companies at existence at the acts commencement and any bank before commencing banking
business India had to apply for a license to the RBI and could carry on business until final
orders on their applications for licenses were passed.
o Sajjan bank applied for license in 1949, the RBI in a report in 1952 found some defects in the
working of the bank and decided to keep in abeyance the consideration of issuing the license
in view to watch the progress of the bank in eliminating these defects.
o in 1956, a fresh report was made, and the RBI was still unsatisfied with the progress and declined
the license. The petitioners then filed a writ petition asking to court to squash the order of
refusal given by the RBI.
Issue:
§ What is the nature of license granted under section 22 of the banking companies act?
§ If the actions and powers of the respondent (RBI) to grant a license are in the nature of a permit?
Held:

o Section 22 introduces a system of licensing of the banks by the RBI and such a license is
dependent upon maintenance of a satisfactory financial condition.
o License v Permit : a license is intended to regulate a business while a permit is without which
a business can never be started. So, a permit amounts to prohibition of the business to people
who have failed to obtain the same. Thus, a license is not necessarily a permit.(CSS Motor
Service v. Madras State)
o the existence of rules for guidance of authority, the insistence for reasons of refusal, provision
of right to appeal, the quasi-judicial nature of inspections and enquiry – all of this which was
constituted by a statute was only a regulation of trade by issue of license and not an insistence
of a permit.
o Refusal of license under section 22 does not mean a stoppage of business. The essence of
banking is the opening of current accounts and enabling the constitute to draw checks. The
refusal of license would mean a loss of that type of business, and the petitioner can still
carry on business as money lenders and the only restriction being that it cannot have
transactions under which one has to draw cheques on him.

Johny Kuruvilla v Reserve Bank of India 2004 (2) KLT 693 Kerala

FACTS:

• The cumulative effect of the circulars is that Primary Co-operative Banks of the country
are not to make, provide or renew either secured or unsecured loans and advances nor
extend any other financial accommodation to its directors and their relatives.
• Petitioner submitted that the powers of the Reserve Bank of India for issuing circulars could
be traced to Section 21 and Section 35A of the Banking Regulation Act, 1949 alone...
• Even though such powers are invoked in the present orders, a scrutiny, will reveal that there
has not been any independent consideration at the instance of the Reserve Bank of India
while issuing such circulars.
• Where the Reserve Bank of India is satisfied that it is necessary and expedient in the public
interest and in the interest of the Banking policy or to the interest of the depositors or to the
 interests of the banking company generally, it has the power to issue circulars binding the
banking companies.
• But as per the Petitioner’s submission, there has not been any independent consideration at
the level of the Bank for bringing this restriction.
• RBI submitted that the Reserve Bank of India is expected to issue circulars under Ss.21 and
35A of the BR Act as per necessity on any occasion. RBI refutes the further submission of
the petitioner that there was no detailed consideration of the Reserve Bank of India before
the promulgation of the two circulars
• As a matter of fact, the monetary and credit policy for the year 2003 and 2004 issued by
the Bank are positive to indicate that every aspect had been considered by the Bank and
they have come to an independent conclusion that such restrictions are eminently required.

ISSUE:

1. Kerala HC, interpreting Ss. 20, 21 & 35 and dealing with power of the RBI to issue
circulars, the petitioner questioned the justifiability and suitability of circulars issued by
the Reserve Bank of India dated 29.4.2003 and 26.6.2003.
HELD:

• Court held the circulars to be a measure to curb the possible misuse of position of persons
at the helm of affairs of urban cooperative bank and further noted that there was no
Jurisdiction of the court to prove into the deliberation. It was also held that classification
of a group of persons as relatives of Directors could not be considered as objectionable or
arbitrary, in light of Sections 20 and 21.

Radhe Estate Developers v/s Mehta Integrated Finance Co. Ltd & Others Gujarat HC
Decided on April 26, 2011 (LETTERS PATENT APPEAL No. 113 of 2010)

FACTS:

• The State Legislature has exclusive power to enact the laws under Art.246(3) of the
Constitution of India, particularly with regard to moneylending.
• Entry 30 of List-II of the 7th Schedule of the Constitution empowers States to enact such
laws with regard to `moneylending and moneylenders’ and according to him, the salient
provisions of Bombay Money-Lenders Act, 1946 are enumerated in Secs.
• Cs. according to him, the provisions of the Money- Lenders Act contravene any of the
provisions of Chapter IIIB of the R.B.I. Act, so far it relates to NBFCs. He submitted that
except laying out appropriate internal principles and procedure for interest rate, processing
and charges to be levied by the N.B.F.Cs, no punitive or regulatory steps have been
prescribed under Chapter IIIB of the R.B.I. Act, and in the absence of any overlapping
provision, there is no repugnancy in any manner with the Money-Lenders Act.
• It has already been held that except the companies mentioned thereunder and referred to
above, companies incorporated under the Indian Companies Act, 1956, do not come within
the definition of `money-lender' as defined u/Sec.2(10)(iiia) r.w. Sec.2(4) of the Money-
Lenders Act.
• Any law corresponding to any of the Acts or the Ordinance aforesaid and in force-
• 21 Sec.3 of the Indian Companies Act, 1956, was referred to by the learned A.G.P. to
suggest that the companies registered under the Indian Companies Act, 1956, now come
within the definition of Sec.2(4) of the Money-Lenders Act, so as to give purposeful
meaning to the word `company' as referred to in Money-Lenders Act.
• The Money-Lenders Act is not applicable to the Companies incorporated under the Indian
Companies Act, 1956.
• Parliament and the Legislatures of the States are empowered to make laws in respect to
any of the matters enumerated in List-I and List-II in the 7th Schedule respectively.
• List-III in Schedule 7 is a concurrent list in relation to which Parliament and the
Legislatures of the States have powers to make law.
• Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make
laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this
Constitution referred to as the Union List ).
• Parliament has power to make laws with respect to any matter for any part of the territory
of India not included 2[in a State] notwithstanding that such matter is a matter enumerated
in the State List."
• Legislature of a State has exclusive power to make laws for such State or any part thereof,
but it will be subject to clause (1) and (2) Art.246.
• A State Act is always subject to a Central Act.

ISSUE:

1. What will prevail if there is an inconsistency between the RBI Act and the Moneylenders
Act

HELD:

• If there is inconsistency between the provisions of the R.B.I. Act and Money Lenders Act,
so far as it relates to `companies' as defined u/Sec.2(4) of the Money-Lenders Act, in that
case, the provisions of R.B.I. Act will prevail.
• If any provision of a law made by the Legislature of a State is repugnant to any provision
of a law made by Parliament which Parliament is competent to enact, or to any provision
of an existing law with respect to one of the matters enumerated in the Concurrent List,
then, subject to the provisions of clause (2), the law made by Parliament, whether passed
before or after the law made by the Legislature of such State, or, as the case may be, the
existing law, shall prevail and the law made by the Legislature of the State shall, to the
extent of the repugnancy, be void.
• The real problem can be only noticed while determining whether a particular State law is
repugnant to a Central Act.
• On a careful consideration of the authorities referred to above, the following propositions
emerge:-
• In order to raise a question of repugnancy two conditions must be fulfilled.

Sundaram Finance Limited & others vs. State of Gujarat, Gujarat HC Decided on
06/09/2012 (SPECIAL CIVIL APPLICATION No. 6223 of 2011 with SPECIAL CIVIL
APPLICATION No. 12009 of 2011)

FACTS:

• There was a prayer for declaring that the provisions of the GML Act and its applicability
to the NBFCs registered with RBI are illegal as ultra vires the Constitution, and
unconstitutional in the absence of legislative competence.
• It is to be noted here that the GML Act has prescribed the definition of ‘company’ to mean
a company as defined under the Companies Act, 1956 and a ‘money lender’ to include a
‘company’.
• The GML Act also provides for a doctrine of implied registration for the NBFCs registered
with RBI.
• Further, the definition of a ‘loan’ excludes the deposit of money or other property in banks,
but not the activities of a company registered under Chapter IIIB of the RBI Act such as
NBFCs. Apparently, the enforcement of the new GML Act had created lots of complexity.
HELD:

• The Court held that the new GML Act is ultra vires the Constitution for legislative
incompetence of the State Legislature, only to the extent that it seeks to have control over
the NBFCs registered under RBI Act in the matter of carrying on their business.
• The Court held that exercising rights as an NBFC is within the purview of the RBI Act, and
therefore they are bound to follow guidance of RBI and that no other State law can interfere
with its business activities if it conforms to the provisions of the RBI Act.
• Thus, within the scope of the activity of an NBFC as provided in the RBI Act, the State
Legislation has encroached upon the RBI’s role by imposing its control over it in addition
to that imposed under the RBI Act and thereon the direct repugnancy arises.
• It is worthwhile noting that the decision of the Kerala High Court in the case of M/S.
Sundaram Finance Ltd vs State Of Kerala stood contrary to what the Gujarat High Court
held in the aforesaid cases.
• The Kerala High Court held that the Kerala Money Lenders Act, 1958 is not without force,
and that both the RBI Act and the provisions of the Kerala Money Lenders Act
simultaneously apply to NBFCs.

NBFCs

M/S. Arjun Shyam & Co. (P) Ltd vs M/S. Sagar Trading Co. & Ors, Cal HC (GA 391 of
2015 with CS 243 of 2012) Decided on August 11, 2015

Business of NBFC vs. Money-lending - RBI Act > State Act wrt NBFCs

Facts

• Def. failed to pay the loan and interest to the plaintiff

• Def. presented several cheques but they were all dishonoured
• Plaintiff filed a case for recovery of the money

On behalf of the Defendants

• Suit is not maintainable in the absence of any license under the Bengal Money-lenders Act
- the contract is not enforceable
• Limitation has passed (counted from the date of order to furnish documents)

On behalf of the Plaintiff

• The application was within limitation (purposive interpretation - counted from the date of
filing WS)
• Plaintiff was an NBFC and had a license from the RBI. It did not need a license under the
Bengal Money-Lenders Act.
Issues

1. Whether the suit is maintainable under the Original Side Rules?

2. Whether the suit is barred under the Bengal Money-Lenders Act?

Held

• The suit is maintainable - relevant date is the time when the WS is filed and notice is served
on the plaintiff
• Section 8 of the Bengal Act states that money-lending business should not be carried except
under license.
• Section 13 further states that a suit will be stayed when the money-lender does not hold
possess license.
• Features of the Bengal Act:
o Purpose: to regulate transaction of money-lending
o Applied to commercial loans as well
o Suit could be brought before the court without a license but not be proceeded with
until such license was obtained
o The Act required regularity to constitute business of money-lending - die not apply
to isolated/ occasional money lent.
• Banking is a union subject while money-lending is a state subject
• Money lender defined in Bengal Act as person who carries on business of money lending
(in Bengal) and business of NBFC defined in RBI Act as business conducted by a financial
institution.
• The RBI Act has an overriding effect over any law inconsistent therewith for the time being
in force or any instrument having effect by virtue of any such law (but no inconsistency
between the two Acts here).
• RBI act protects depositors while money-lending Act protects borrowers.
• “The non-banking financial companies are not covered by the definition of 'money-lenders'.
A non-banking financial company means a non- banking financial institution which is the
company, and which has its principal business amongst others is lending in any manner.
Once an NBFC holds the license by virtue whereof the said NBFC can carry on business
anywhere in the country unless a State legislature specifically requires an NBFC to obtain
a license under the State legislation, in my view, the claim of an NBFC to realize money
cannot be defeated.”

M/S. Sundaram Finance Ltd vs State of Kerala, Decided by Kerala HC (WA. No. 540 of
2007) on November 18, 2009

NBFCs - State Act vs. RBI Act - both Acts apply simultaneously (contrary to pvs judgement)

Facts

• App. are NBFC regd with RBI, engaged in the business of money-lending
• Single Judge holds that they are money-lenders under the Kerala Money Lenders Act
• File appeal challenging this interpretation

On behalf of the Appellant

 • Being companies regd under the CA, they are not “persons” under the Kerala Act and
cannot be money-lenders
• Even if “person” - covered by exception to money-lender by being an institution estd under
a Central Act (CA)
• RBI Act governs NBFCs and State Act is inoperative on them

Issue

• Business of NBFC = business of money-lending?

Held

• “Person” under the Kerala Act includes artificial persons.

• Second contention also cannot be accepted because exception only applicable to a
legislation for est of an inst. to carry on business of loan/ advances - companies under the
CA are not necessarily this.
• No conflict between State and RBI Act hence overriding clause N.A. - not outside the
purview of the State Act
• Sec. to the Govt also communicated that the State Act would be applicable on NBFCs to
protect borrower interest + RBI in its letter also thought Kerala Act would apply to
NBFCs.

L & T Finance Limited versus M/s. Saumya Mining Ltd. and others, Bom HC, Decided
on July 8, 2014 (ARBITRATION PETITION NO. 290 OF 2014)

RBI Act to have overriding effect

Facts

• There was loan agreement between the petitioner and the respondents
• The respondents defaulted in making payment
• Invoked arb clause - blah blah arb part not relevant
• Resp. → petitioner was governed by Bengal Money Lenders Act and since had not obtained
license - express bar to proceed with the suit

Held

• Relied on Sajjan Bank (and other cases) to distinguish between banking business and
ordinary money-lender
• Relied on a SC case (Mayavaram Financial Corp) where it was held that scope of NBFCs
under RBI Act is excluded from “money-lending” (pith and substance related to control of
credit by the RBI)
• RBI Act has an overriding Act - existing laws do not become invalid. Thus, the App. needs
to be regd under the State Act - Harishankar Bagla
• RBI governs all aspects of NBFCs
• State Govt has not issued any notification including companies under “money-lenders”
• The examination of the situation in light of the aforesaid goes to show that Parliament has
not made the law for regulating the business of money-lending activity in the country
by all persons including N.B.F.Cs.. But it has made law for regulating the activities of
loans and advances by specific class of persons, viz. N.B.F.Cs. Whereas, the State law
 provides for controlling and regulating the business of money-lending for all persons which
includes the Companies registered under the Companies Act.
• However, once the Parliament having enacted the law for regulating the activities of loans
and advances through R.B.I. of such Companies which are covered in the definition of, if
the application of M. L. Act to such N.B.F.Cs. are allowed to continue, there would be
overlapping of the State legislature over the laws made by the Parliament to that extent.
As observed earlier, when the State legislature enacted M. L. Act, for the Companies like
N.B.F.Cs. in the present case, activities were not being regulated by any laws of the
Parliament.
• If the laws passed by the Parliament (RBI Act) are to operate over the earlier laws made by
the State Government (BML Act), it would be reasonable to hold that the companies which
are covered under chapter IIIB of the RBI Act (NBFCs) would not be falling under the
BML Act. Otherwise there would be conflict of the two laws over applicability over
NBFCs. RBI Act would have overriding effect.
CRB scam-
Accepting deposits at large scale, with almost 20% rate of return. Mutual fund deposits. The
more deposits we receive, the more investment we make. Cap given by RBI that the mutual
fund cannot make more than 2twice the amount of deposits investment. Cavet was that only
those NBFCs with deposits were capped at 2times. But those leasing out equipment had a cap
of 10x.
CRB was a company and starting duping people that we are also a deposits accepting company.
He managed to get a AAA rating from credit rating companies. A major part of the deposits
was funneled into subsidiaries. Through shell companies, he invested in main company and
inflated share price of it. He fooled SBI. Downfall starts. In 1995 dividend warrants is like a
cheque, whatever profit the shareholder receives after dividend is declared by the co, is given
to them through dividend warrants. They put in the drop box in the bank, bank encashed it. It
so happened that all these were fake shareholders, concocted, manufactured by CRB. Finally,
he raised 59cr from SBI, when SBI looked into the books of accounts, they noticed
malfunction. This fellow also applied for bank license. RBI also started investigating this
fellow’s books of accounts. Scam on multiple fronts. RBI filed winding up petition before
Delhi HC. 1996 he was exposed. The govt. makes an amendment in 1997 in the RBI act 45IA.

50-50 rule- 50% of the assets to be financial assets. More than 50% of the business of the NBFC
should be in financial assets.
Sahara’s case-
RBI filed winding up of sahara before the Lucknow bench of the HC. The court finds sahara
to be guilty of all provisions of 45MC. Passed the order for winding up of sahara. One question
raised was with respect to applicability of laws of company act. 45MC(4)- sahara can raise an
objection that HC is not competent to listen to this case. under the companies act, the competent
court was NCLT so sahara raised an objection that the proceedings should be heard in this
court, as per the transfer rules all pending cases also should be heard by the NCLT. The court
makes a distinction between the initiation of proceedings under the Companies act or the RBI
act. this is a proceeding initiated under the RBI act. left at the discretion of the RBI to initiate
a proceedings under the companies act or the RBI act. one the contentions in appeal at the
division bench of the HC, that HC exercised its jurisdiction wrongly.
The single judge assumed jurisdiction. The question of law- to what extent can the provisions
of the Companies act play a role under winding up proceedings under 45MC of RBI act. para
22 of the appellate judgement mention that there no forum for winding up proceedings to be
initiated under the RBI act of an NBFC. Section 45MC says winding up proceedings to be
initiated with the provisions of companies act being applicable. When there is no mechanism
mentioned and the section screams that the provisions of the NCLT will be applicable, the
appeal was maintainable. But ultimately dismissed the appeal, because the individual was not
authorized to file this before a court of law. And then the single judge order prevails however,
the SC has stayed it.
Under the BRA, the forum where the proceedings can be initiated was specified- HC.
Can you seek a mandamus against RBI to cancel its license. No because RBI is a regulator and
you cant tell it do its job, the RBI will work and you can intervene only if it appears on the face
of it prejudicial. Very specialized matters, so the court should not intervene.

Jain ghotala- hundi transactions. Case of money laundering. Vineeth Narayan- journalist and
ratted out the scam. The diary of the Jain brothers was found, it also had names of bigshot
politicians. Multiple kids of writ stated in this case. Continuous mandamus was issued where
the court directed CBI to conduct investigation into this matter and CBI is answerable to DOPT.
So the court said, CBI’s investigation was under our supervision as its report is vulnerable
because there included many politicians.

Sarfaesi
Securitization and reconstruction of financial assets and enforcement of security interest act.
Mallaya had brewery united breweries. Kingfisher airlines. Acquired air deccan and later
wanted to procure license of flying international. For sustaining his enterprise for a longer time,
he started taken loans from almost all banks. Total loan aggregated to 9000cr. The collateral
part forgone by banks as he was an influential and also was in the parliament. His own
companies were acting as guarantors. All banks declared loan accounts as NPAs. Declared as
npa the banks proceeded to liquidate the property of mallaya to gain their money back. Sarfaesi
empowered banks to liquidate the property. Auction without the intervention of any
adjudicating authoritiy. That was not available to banks under the previous legislation. RDB
act. under the previous acts, delays were making the money get stuck and reducing cashflow
in the economy.
Criminal suits, PMLA, IPC, FIRs fugitive act invoked and didn’t get mallaya back to India.
contempt notices and mallaya said do what you want I am not in India. look at sarfaesi and
RDB through this lens. Mardia chemicals case- look into it.
National Bank for Agricultural and Rural Development (NABARD)

•1982 – u/ NABARD Act 1981 – Merging of Agricultural Credit Department and Rural
Planning and Credit Cell of the RBI + Agricultural Refinance and Development Cooperation.
•Came up on the recommendations of CRAFICARD (Committee to Review Arrangement for
Constitutional Credit and Rural Development) by RBI.
•CRAFICARD came to the conclusion that –
1.There are massive credit needs for rural development and the need to uplift the weaker
sections to rural areas within a given time horizon, which called for a separate institutional set
up.
2.RBI had onerous responsibilities to discharge with respect to many basic functions of central
banking and therefore not in a position to give undivided attention to operational details of the
emerging complex credit problems
•Apex development bank for supporting and promoting Agricultural and Rural development.
•Preamble – “for providing credit for the promotion of agriculture, small scale industries,
cottage and village industries, handicrafts and other rural crafts and other allied economic
activities in rural areas with a view to promoting integrated rural development and securing
prosperity in rural areas, and for matters connected therewith or incidental thereto.”

1.Planning – dispensation – 1.Assist Government, 1.Inspection of the RRBs and

monitoring of credit for RBI, and other Cooperative Banks
potentially linked projects for institutions in rural 2.RRBs and cooperative
all districts in the country. development efforts. banks will have to file returns
2.Provides Short term/ ● and documents to NABARD.
medium term/ long term 2.Provides facilities for 3.RRBs and cooperative
credit to SCBs & RRBs. training and research. banks will have to seek
3.Refinance to eligible ● permission from NABARD
institutions - SCBs & RRBs 3.Creates awareness for opening up of further
among borrowers on branches
ethics of payment
EXIM Bank

National Housing Bank (NHB)

SIDBI

Scheduled Banks & Non-Scheduled Banks

Scheduled Banks
1)Banks which have been included in the II schedule of the RBI Act 1934.
2)Banks included in this category should fulfil two conditions –
a) Paid up capital and reserves of an aggregate value of not less than Rs. 5 lakhs.
b) Any activity of the bank will not adversely affect the interests of the depositors
Every scheduled bank enjoys the following facilities from the RBI -
Non-Scheduled Banks
1)Banks not included in the list of scheduled banks.
2)Follow CRR conditions but no compulsion to deposit it with the RBI.
3)Not eligible for having loans from the RBI for day to day activities but u/ emergency
conditions RBI can grant loans.
Regional Rural Banks
National Banking Financial Companies (NBFCs)

NBFCs are categorized

a) type of liabilities into Deposit and Non-Deposit accepting NBFCs
b) non deposit taking NBFCs by their size into systemically important and other non-deposit
holding companies
c)by the kind of activity they conduct.

Within this broad categorization the different types of NBFCs are as follows:
1.Asset Finance Company (AFC)
2.Investment Company (IC)
3.Loan Company (LC)
4.Infrastructure Finance Company (IFC)
5.Systemically Important Core Investment Company (CIC-ND-SI)
6.Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC)
7.Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI)
8.Non-Banking Financial Company – Factors (NBFC-Factors)
9.Mortgage Guarantee Companies (MGC)
NBFC- Non-Operative Financial Holding Company (NOFHC)

GENERAL RELATION OF BANKER TO CUSTOMER

•The definition of the relationship between a banker and customer is as elusive as the definition
of the term “customer”
•By far, it has been best captured in Joachimson v. Swiss Bank Corporation
(See page 629 of Tanaan 2010 Commentary)
•The mere opening of a current account by a customer and the banker’s acceptance thereof
involve a contractual relationship by implication.
•As per the old view, a banker was usually thought of as a reliable depository, as was the case
of goldsmiths who were first paid no interest on deposits.
–Debtor and Creditor
–Trustee Relationship
–Agency Relationship
–Bailor - Bailee

Debtor and Creditor

–The relationship between a bank and its customers is the ordinary relation of creditor and
debtor with the superadded obligation arising out of custom of banks to honour customer’s
draft. The position is that once a sum of money is deposited with a bank there remains only a
debt due from the bank to the customer. The money can be used by the bank in every permissible
manner, the bank is really the debtor of the customer to that extent.
(Dharmendrasingh Dolubbic Zala v. State Bank of Saurashtra, 1997).
Sir John Paget – “is primarily that of a debtor and creditor, the respective positions being
determined by the existing state of the account

–Velji Lakhamshi & Co. v. Dr. Banaji (1955)

The Bombay HC has thrown further light on the relation between banker and customer
by holding that the relation between a banker and customer is that of a debtor and
creditor and any amount due by the banker to the customer in that relationship cannot
be claimed by the customer from the bank as a preferential creditor., if the bank is
wound up. If the bank acts as an agent and not as a debtor, then the agency brings about
a fiduciary relationship which lasts until the agency is terminated...
–The generic relationship between a customer and his banker is that of a creditor and his debtor,
but not necessarily in that order.
–Money when paid to a bank ceases altogether to be the money of the principal

–The English Courts have again and again validated that money placed in the custody of a
banker is to all intents and purposes, the money of the banker, for him to do with as he pleases.
He is not answerable to the principal if his investment of depositor’s money runs into the risk.
He is of course answerable for the amount because he has contracted, having received that
money to repay the principal, when demanded or when due.
–Joachimson v. Swiss Bank Corporation
The debt due from a banker to customer and a debt due from an ordinary borrower have
2 distinctions-
ordinary borrower– debtor should find the creditor.
banker-customer – creditor (customer) has to make a demand on the debtor (bank)
Delhi Cloth and General Mills Co. Ltd v. Harnam Singh (1955)
It was held that the banker-customer contract is an exception to the rule that a debtor should
find his creditor. Here the creditor (the customer) has to make a demand on the debtor (banker).
The demand can be made only at that branch where the customer account is kept.

Agency Relationship
A service offered by the bankers to the customer is to collect the customer’s cheques and credit
other instruments such as interest warrants, pension bills etc. in these cases, the relationship
between the parties is that of a principal and an agent.
when a banker buys or sells securities on behalf of his customer; he performs an agency
function.
similarly, when he collects cheques, dividends, bills or promissory notes on his customer’s
behalf, he acts as his agent.

Travancore v. Quillon Bank

An amount was paid into the bank for remittance as a telegraphic transfer to a company
in Bombay. It was held that such money was held by the bank on behalf of the applicant
and as the property of the applicant, apart from the money held as the property of the
bank. The bank received the money in the capacity of a mere agent.
–Official Assignee of Madras representing the Estate of S.N. Firm v. Natesan Pallai (1940)
–Bank of India v. Official Liquidator (1950)
In both cases, similar essence was reflected - Monies held by the bank for effecting a
specific transaction puts the bank receiving such monies in a fiduciary position, and the
relationship then is not that of a debtor and creditor.

Bailor-Bailee
–The legal relationship that arises in case of safe deposit or safe custody is that of bailment.
–The customer who deposits with the bank for safe custody is the bailor and the bank the bailee.
–Bailor for reward - if fees are charged
–Gratuitous bailor – if free!
–Kel United Service Co. v. Johnson’s Claim
In cases where fees are levied, the bank becomes a bailee for reward. Where the bank
accepted the customer’s securities for safe deposit and his instructions to collect
dividends thereon, and collected commission for the service, the banker became bailee
for reward.

•United Commercial Bank v. Hem Chandra Sarkar

“. Bailment is the delivery or the transfer of possession of a chattel with a specific mandate that
requires the identical res either to be returned to the bailor. One important distinction between
agency and bailment s that the bailee does not represent the bailor. He merely exercises with
leave of the bailor, certain powers of the bailor in respect of his property. Secondly, a bailee
has no power to make contracts on behalf of the bailor. Nor can he make the bailor liable for
any act that he by himself in relation to the property bailed...”
PROJECT FINANCE

•Project finance is the funding (financing) of long-term infrastructure, industrial projects, and
public services using a non-recourse or limited recourse financial structure.
•The debt and equity used to finance the project are paid back from the cash flow generated by
the project

•In simple words, project finance means structured financing of a specific economic entity SPV
[Special Purpose Vehicle] also called as the project company created by sponsors using equity
or mezzanine debt and for which lenders consider cash flows as being the primary source of
loan reimbursement, whereas assets represent collateral.
•Most authors agree that it does not depend upon the soundness of credit worthiness of the
sponsors (i.e. the parties proposing the business idea to launch the project).
•Approval does not depend on the value of the assets of the sponsors who are willing to make
available as collateral.
•Rather, it is basically a function of the project’s ability to repay the debt contracted and
remunerate the capital invested at a rate consistent with the degree of risk inherent in the
venture concerned.
•Project finance debt can be non-recourse or limited recourse to the project sponsor.
•Non-recourse project finance –
–Predicated completely on the merits of the project rather than the credit of the project sponsor.
–Since, it is non-recourse, the project sponsor has no direct legal obligation to repay the project
debt.
–Ability of the project sponsor to produce revenue from the operation is the foundation of a
project financing, the contracts form the framework for project viability and control allocation
of risks. Contracts that represent the obligation to make a payment to the project company on
the delivery of some product or service are very important because these contracts govern cash
flows.
•Limited recourse project finance –
–Indicates limited obligations and responsibilities of the project sponsor.
–Gravity of the recourse is dependent upon the unique risks in the project + the markets
approach to handle the same.
•Historically, project finance was used in oil extraction and power production sectors.
•Initially it involved parties in the private sector and over the years it has been increasingly
used to finance projects in which public sector plays an important role.
Private sector participation in realising public works is known as PPP (public-private
partnership). The role of the public administration is usually based on a concession agreement
that provides various alternatives
 Green Finance
Green finance- cashless, digital finance for green production, green projects?
Why should bankers be responsible for saving the environment?
Fundamental role of financial system: Channelize funds from those households that are no
immediate need of this money to the people who need it. Reimagine the purpose of financial
regulation towards the environment keeping in view climate related issues, the global financial
crises.
Nexus between environment and financial regulation
Move from high to low carbon intensity. Shift can be difficult and abrupt for financial
institutions.
Carbon Tax- that will enable organizations to change their position towards environmental
issues. Tax them on the basis of their carbon footprint.
What to do to reduce the risks?
Policies in investments towards climate change and environment and carbon footprint.
Invest in climate resilience and climate change and taxing carbon footprint. Green investment
push combined with gradually increased carbon price.
Started in 2015- Paris agreement- 7 steps sustainable development. Sustainability risk nexus.
What is that the financial system can do to bring this into place and what can it gain/ benefit
from this sustainable risk management. Profiting from the project has been materialistically
oriented.
Finanical system runs on the working on businesses what work with natural resources. If these
natural resources are depleted, no projects to provide finance. Banking companies, he quickly
they are able to realize this, the better for them
Fractional reserve system- only certain portion of the individulas will withdraw their demand
deposits at any given time. But when this wont happen, and all withdraw their deposits banks
will not be in a position to tackle the issue.
There are various methodology that can be used to determine whether or not the project will
be viable or not. However, this will not be viable for projects that have a green intention behind
them.
Environmental friendly projects are traditionally competing with fossil fuels projects which is
not a level playing field.
UNEP 2016 report.
Environment, social, economic, governance- nested interests, bound to overlap. Aim is to
finance green projects such as saving a forest, building embankments, etc.
Tesla example: different rating scale agencies- ESG rating agencies- start marking companies
on the basis of their environmental friendly. The basis of policies etc. the parameters on which
these rating scales are based are different, on the basis of their fossil fuel emissions.
Battery operated cars are nonetheless beneficial. However, the energy used for running these
vehicles supports fossil fuel industries. Ultimately carbon footprint is more.
Should regulators decide the bench mark or should the market determine it. As it will determine
the venchmark very conveniently.
Law developed at this end of green finance? The law is a royal mess. No coridnation between

9.11.2022
Non-renewable source of energy when employed for its uses—massive carbon emissions.
Conglomerates in the business of these products. If the price of these products is fixed how the
market determines the prices, Q: is the price (of products which emit high carbon emissions,
can we say that it is the real price of the products?) massive carbon emissions leads to climate
change. Does it reflect the true value and price,
Green finance advocates argue that the real price can be determined only if you factor in the
massive carbon emissions that these products emit. For example: because of massive carbon
emissions, hurricanes have been coming that destroy the houses and the loans taken on these
houses are unable to pay back and the financial institutions are unable to recover, cashflow
suffering, increase in rates. People suffer, hospital bill increases, have certain costs
Setting up a plant leads to certain costs, fuel required it has a price, massive carbon emission.
That is not factored into it. When generating power out of coal, their quantum of their emissions
must be taken into account to set its price. Quantify the consequences to the environment and
then set the price of the product accordingly.
When you determine/ say that non-renewable source of energy have massive carbon emissions,
why would the business resort to renewable sources of energy?
NRS- cheaper, RS- expensive.
Answer lies in regulation- what is the going to be the role of regulation in green finance-
Green bonds- World bank. SEBI listed security, annual audits.
But is there not an economic gap that is witnessed amongst people to fund renewable sources
of energy. (generic argument). The government has been giving subsidy to people to set up
solar power plants at their rooftops 30-70% according to income slab and 100% subsidy given
by a few states.
Rampur power plant established by issue of green bonds. Has reduced the carbon emissions by
1.4lakh tons. Power generated through h water has lower carbon emissions, than coal, thern the
bigge Q: who will establish such more plants. Will the govt, do it or the private entity but why
would they have the incentive? Will they work subsidy or PSU model. Rampur hydro project
has helped the people. Given pakka houses to those displaced, given land at their choice of
place and means for other livelihood. Motorable bridge across the river, 100units of free
electricity every month, 1-2% of the profits from the project distributed amongst these people
every year.
Tehri dam- mini navratna company. Enormously profitable for the govt. 100s of villages
displace and huge investment by the govt. solved major power crises in uttakhand.
Govt would want private entities to step in in that context – the idea of green bonds becomes
important. Now we see adani and all coming into this sector.
Markets reflect magic only when they reflect real costs. But in the current day and age do
markets relflect real prices? Products are chearp because you pay nothing for the damage doen
by these products.
Real cost of coal is also the climate change carbon emissions. Hidden costs are similarly
enormous.
Easy answer- ppp.
Build a business that sets climate change and also earns profits.
Allow the bottom feeders survive. Push the other businesses also to do the same.
Eco-friendly, sustainability.
Fixing free and fair markets in a capitalist market.
Dialogue at the global level sharing information of practices worked out in various countries.
If these could be implemented at other countries.
Kenyan green bond program.
Key risks faced during transition- leverage of banks on each side.
Orivate sectors have the kind of money to take up such projects and the givt could give them
incentives to these. Rate of interest, secured unsecured credit, is the green finance. PPP- public
private partnership.
R&R projects. Rehabilitation and resettlement initiatives for the people whose lands are being
acquired by the govt for such projects, benefits such as health, school, govt recognized
autonomy of the people. Constructed with eminent domain approach,
Make it more lucrative opportunities for investors and security and incentives to invest in the
green bonds, high rate of interest bonuses, etc. prefential loan system , robust mechanism to
make sure any mishap is taken care of and subsidy and lower rate of interest for providing
incentievs to come up and take these projects dealing with RSE. Viability of the project taken
into account.
 www.rbi.org.in
RBI/2022-23/111
DOR.CRE.REC.66/21.07.001/2022-23 September 02, 2022

All Commercial Banks,

Primary (Urban) Co-operative Banks, State Co-operative Banks,
District Central Co-operative Banks; and
Non-Banking Financial Companies (including Housing Finance Companies)

Madam/ Sir,

Guidelines on Digital Lending

A reference is invited to para 7 of the RBI Press Release “Recommendations of the

Working Group on Digital Lending – Implementation” dated August 10, 2022. Detailed
guidelines on recommendations of the Working Group accepted for immediate
implementation are attached as Annex I to this circular.

2. It is reiterated that outsourcing arrangements entered by Regulated Entities (REs) with

a Lending Service Provider (LSP)/ Digital Lending App (DLA) does not diminish the REs’
obligations and they shall continue to conform to the extant guidelines on outsourcing 1.
The REs are advised to ensure that the LSPs engaged by them and the DLAs (either of
the RE or of the LSP engaged by the RE) comply with the guidelines contained in this
circular.

3. It is further advised that the instructions contained in this circular shall be applicable to
the ‘existing customers availing fresh loans’ and to ‘new customers getting onboarded’,

1 Para 2.6 of the Master Circular on “Loans and Advances – Statutory and Other restrictions” dated July 01, 2015;
Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks issued vide Circular
dated November 03, 2006 as amended from time to time; Para 120 and 120 A of “Master Direction - Non-Banking
Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve
Bank) Directions, 2016” dated September 01, 2016, as amended from time to time; Para 106 and 106A of the ‘Master
Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve
Bank) Directions, 2016’ both dated September 01, 2016, as amended from time to time; ‘Guidelines for Managing Risk
in Outsourcing of Financial Services by Co-operative Banks’, dated June 28, 2021; Circular on ‘Outsourcing of Financial
Services - Responsibilities of regulated entities employing Recovery Agents’ dated August 12, 2022, and other related
instructions issued by the Reserve Bank from time to time.
from the date of this circular. However, in order to ensure a smooth transition, REs shall
be given time till November 30, 2022, to put in place adequate systems and processes to
ensure that ‘existing digital loans’ (sanctioned as on the date of the circular) are also in
compliance with these guidelines in both letter and spirit.

4. These directions are issued under sections 21, 35A and 56 of the Banking Regulation
Act, 1949, sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934, sections
30A and 32 of the National Housing Bank Act, 1987, section 6 of the Factoring Regulation
Act, 2011 and section 11 of the Credit Information Companies (Regulation) Act, 2005.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager
 Annex I

Guidelines on Digital Lending

1. Scope of Application: These guidelines are applicable to digital lending extended

by:
1.1. All Commercial Banks,
1.2. Primary (Urban) Co-operative Banks, State Co-operative Banks, District Central
Co-operative Banks; and
1.3. Non-Banking Financial Companies (including Housing Finance Companies)

2. Definitions
2.1. Annual Percentage Rate (APR): APR is the effective annualised rate charged
to the borrower of a digital loan. APR shall be based on an all-inclusive cost and
margin including cost of funds, credit cost and operating cost, processing fee,
verification charges, maintenance charges, etc., and exclude contingent charges
like penal charges, late payment charges, etc.
2.2. Cooling off/look-up period: A cooling off/ look-up period is the time window as
determined by the Board of the RE which shall be given to borrowers for exiting
digital loans, in case a borrower decides not to continue with the loan.
2.3. Digital Lending: A remote and automated lending process, largely by use of
seamless digital technologies for customer acquisition, credit assessment, loan
approval, disbursement, recovery, and associated customer service.
2.4. Digital Lending Apps/Platforms (DLAs): Mobile and web-based applications
with user interface that facilitate digital lending services. DLAs will include apps
of the Regulated Entities (REs) as well as those operated by Lending Service
Providers (LSPs) engaged by REs for extending any credit facilitation services
in conformity with extant outsourcing guidelines issued by the Reserve Bank.
2.5. Lending Service Provider (LSP): An agent of a Regulated Entity who carries
out one or more of lender’s functions or part thereof in customer acquisition,
underwriting support, pricing support, servicing, monitoring, recovery of specific
loan or loan portfolio on behalf of REs in conformity with extant outsourcing
guidelines issued by the Reserve Bank.
 2.6. Regulated Entities (REs): The entities to whom this circular is applicable as
stated at Para 1 of these guidelines.

A. Customer Protection and Conduct requirements

3. Loan Disbursal, Servicing and Repayment - REs shall ensure that all loan
servicing, repayment, etc., shall be executed by the borrower directly in the RE’s bank
account without any pass-through account/ pool account of any third party. The
disbursements shall always be made into the bank account of the borrower except for
disbursals covered exclusively under statutory or regulatory mandate (of RBI or of any
other regulator), flow of money between REs for co-lending transactions 2 and
disbursals for specific end use, provided the loan is disbursed directly into the bank
account of the end-beneficiary. REs shall ensure that in no case, disbursal is made
to a third-party account, including the accounts of LSPs and their DLAs, except as
provided for in these guidelines.

4. Collection of fees, charges, etc.

4.1. Payment of Fees/Charges: REs shall ensure that any fees, charges, etc.,
payable to LSPs are paid directly by them (REs) and are not charged by LSP to
the borrower directly.
4.2. Penal Interest/ Charges: The penal interest/charges levied, if any, on the
borrowers shall be based on the outstanding amount of the loan. Further, rate of
such penal charges shall be disclosed upfront on an annualized basis to the
borrower in the Key Fact Statement (KFS).

5. Disclosures to borrowers
5.1. Annual Percentage Rate (APR) - APR as all-inclusive cost of digital loans for
the borrower shall be disclosed upfront by REs and shall also be a part of the
Key Fact Statement.

2Co-lending arrangements shall be governed by the extant instructions as laid down in the Circular on Co-lending by
Banks and NBFCs to Priority Sector dated November 05, 2020, and other related instructions.
 5.2. Key Fact Statement
5.2.1. REs shall provide a Key Fact Statement (KFS) to the borrower before the
execution of the contract in a standardized format for all digital lending
products. The format of KFS is provided in Annex-II.
5.2.2. The KFS shall, apart from other necessary information, contain the details
of APR, the recovery mechanism, details of grievance redressal officer
designated specifically to deal with digital lending/ FinTech related matter and
the cooling-off/ look-up period.
5.2.3. Any fees, charges, etc., which are not mentioned in the KFS cannot be
charged by the REs to the borrower at any stage during the term of the loan.
5.3. Digitally signed documents – REs shall ensure that digitally signed
documents 3 (on the letter head of the RE) viz., KFS, summary of loan product,
sanction letter, terms and conditions, account statements, privacy policies of the
LSPs/DLAs with respect to borrowers data, etc. shall automatically flow to the
borrowers on their registered and verified email/ SMS upon execution of the loan
contract/ transactions.
5.4. List of LSPs – REs shall prominently publish the list of their DLAs, LSPs
engaged by them and DLAs of such LSPs with the details of the activities for
which they have been engaged, on their website.
5.5. Product information – REs shall ensure that their DLAs or DLAs of their LSPs
at on-boarding/sign-up stage, prominently display information relating to the
product features, loan limit and cost, etc., so as to make the borrowers aware of
these aspects.
5.6. Details of recovery agent – REs shall communicate to the borrower, at the time
of sanctioning of the loan and also at the time of passing on the recovery
responsibilities to an LSP or change in the LSP responsible for recovery, the
details of the LSP acting as recovery agent who is authorised to approach the
borrower for recovery.

3
Digitally signed means a document signed using digital signature.
 5.7. Link to website - REs shall ensure that DLAs of REs and LSPs have links to
REs’ website where further/ detailed information about the loan products, the
lender, the LSP, particulars of customer care, link to Sachet Portal, privacy
policies, etc. can be accessed by the borrowers. It shall be ensured that all such
details are available at a prominent single place on the website for ease of
accessibility.

6. Grievance Redressal
6.1. Nodal grievance redressal officer - REs shall ensure that they and the LSPs
engaged by them shall have a suitable nodal grievance redressal officer to deal
with FinTech/ digital lending related complaints/ issues raised by the borrowers.
Such grievance redressal officer shall also deal with complaints against their
respective DLAs. Contact details of grievance redressal officers shall be
prominently displayed on the websites of the RE, its LSPs and on DLAs and also
in the KFS provided to the borrower. Further, the facility of lodging complaint
shall also be made available on the DLA and on the website as stated above. It
is reiterated that responsibility of grievance redressal shall continue to remain
with the RE.
6.2. If any complaint lodged by the borrower against RE or the LSP engaged by the
RE is not resolved by the RE within the stipulated period (currently 30 days),
he/she can lodge a complaint over the Complaint Management System (CMS) 4
portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS) 5. For
entities currently not covered under RB-IOS, complaint may be lodged as per the
grievance redressal mechanism prescribed by the Reserve Bank.

7. Assessing the borrower’s creditworthiness

7.1. REs shall capture the economic profile of the borrowers covering (age,
occupation, income, etc.), before extending any loan over their own DLAs and/or
through LSPs engaged by them, with a view to assessing the borrower’s
creditworthiness in an auditable way.

4
https://cms.rbi.org.in/
5 Issued vide Notification CEPD. PRD. No.S873/13.01.001/2021-22 dated November 12, 2021
 7.2. REs shall ensure that there is no automatic increase in credit limit unless explicit
consent of borrower is taken on record for each such increase.

8. Cooling off/look-up period –A borrower shall be given an explicit option to exit digital
loan by paying the principal and the proportionate APR without any penalty during this
period. The cooling off period shall be determined by the Board of the RE. The period
so determined shall not be less than three days for loans having tenor of seven days
or more and one day for loans having tenor of less than seven days. For borrowers
continuing with the loan even after look-up period, pre-payment shall continue to be
allowed as per extant RBI guidelines 6.

9. Due diligence and other requirements with respect to LSPs

9.1. REs must conduct enhanced due diligence before entering into a partnership
with a LSP for digital lending, taking into account its technical abilities, data
privacy policies and storage systems, fairness in conduct with borrowers and
ability to comply with regulations and statutes.
9.2. REs shall carry out periodic review of the conduct of the LSPs engaged by them.
9.3. REs shall impart necessary guidance to LSPs acting as recovery agents to
discharge their duties responsibly and ensure that they comply with the extant
instructions 7 in this regard.

B. Technology and Data Requirement

10. Collection, usage and sharing of data with third parties

10.1. REs shall ensure that any collection of data by their DLAs and DLAs of their LSPs
is need-based and with prior and explicit consent of the borrower having audit
trail. In any case, REs shall also ensure that DLAs desist from accessing mobile
phone resources like file and media, contact list, call logs, telephony functions,

6 In terms of Circular DBR.Dir.BC.No.08/13.03.00/2019-20 for banks and DNBR (PD) CC.No.101/03.10.001/2019-20

for NBFCs on “Levy of Foreclosure Charges /Pre-payment Penalty on Floating Rate Term Loans”, both dated August
02, 2019.
7 Circular DOR.ORG.REC.65/21.04.158/2022-23 on ‘Outsourcing of Financial Services - Responsibilities of regulated

entities employing Recovery Agents’ dated August 12, 2022, and other relevant instructions as issued from time to
time.
 etc. A one-time access can be taken for camera, microphone, location or any
other facility necessary for the purpose of on-boarding/ KYC requirements only,
with the explicit consent of the borrower.
10.2. The borrower shall be provided with an option to give or deny consent for use of
specific data, restrict disclosure to third parties, data retention, revoke consent
already granted to collect personal data and if required, make the app delete/
forget the data.
10.3. The purpose of obtaining borrowers’ consent needs to be disclosed at each stage
of interface with the borrowers.
10.4. Explicit consent of the borrower shall be taken before sharing personal
information with any third party, except for cases where such sharing is required
as per statutory or regulatory requirement.

11. Storage of data

11.1. REs shall ensure that LSPs/DLAs engaged by them do not store personal
information of borrowers except some basic minimal data (viz., name, address,
contact details of the customer, etc.) that may be required to carry out their
operations. Responsibility regarding data privacy and security of the customer’s
personal information will be that of the RE.
11.2. REs shall ensure that clear policy guidelines regarding the storage of customer
data including the type of data that can be stored, the length of time for which
data can be stored, restrictions on the use of data, data destruction protocol,
standards for handling security breach, etc., are put in place and also disclosed
by DLAs of the REs and of the LSP engaged by the RE prominently on their
website and the apps at all times.
11.3. REs shall ensure that no biometric data is stored/ collected in the systems
associated with the DLA of REs/ their LSPs, unless allowed under extant
statutory guidelines.
11.4. REs shall ensure that all data is stored only in servers located within India, while
ensuring compliance with statutory obligations/ regulatory instructions.
12. Comprehensive privacy policy
12.1. REs shall ensure that their DLAs and LSPs engaged by them have a
comprehensive privacy policy compliant with applicable laws, associated
regulations and RBI guidelines. For access and collection of personal information
of borrowers, DLAs of REs/LSPs should make the comprehensive privacy policy
available publicly.
12.2. Details of third parties (where applicable) allowed to collect personal information
through the DLA shall also be disclosed in the privacy policy.

13. Technology standards – REs shall ensure that they and the LSPs engaged by them
comply with various technology standards/ requirements on cybersecurity stipulated
by RBI and other agencies, or as may be specified from time to time, for undertaking
digital lending.

C. Regulatory Framework

14. Reporting to Credit Information Companies (CICs)

14.1. As per the provisions of the Credit Information Companies (CIC) (Regulation)
Act, 2005; CIC Rules, 2006; CIC Regulations, 2006 and related guidelines issued
by RBI from time to time, REs shall ensure that any lending done through their
DLAs and/or DLAs of LSPs is reported to CICs irrespective of its nature/ tenor.
14.2. Extension of structured digital lending products by REs and/or LSPs engaged by
REs over a merchant platform involving short term, unsecured/ secured credits
or deferred payments, need to be reported to CICs by the REs. REs shall ensure
that LSPs, if any, associated with such deferred payment credit products shall
abide by the extant outsourcing guidelines issued by the Reserve Bank and be
guided by these guidelines.

15. Loss sharing arrangement in case of default:

As regards the industry practice of offering financial products involving contractual
agreements such as First Loss Default Guarantee (FLDG) in which a third party
guarantees to compensate up to a certain percentage of default in a loan portfolio
 of the RE, it is advised that REs shall adhere to the provisions of the Master
Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions,
2021 dated September 24, 2021, especially, synthetic securitisation 8 contained in
Para (6)(c).

8“synthetic securitisation” means a structure where credit risk of an underlying pool of exposures is transferred, in
whole or in part, through the use of credit derivatives or credit guarantees that serve to hedge the credit risk of the
portfolio which remains on the balance sheet of the lender.
 Annex-II
(cf. Para 5.2.1 of these Guidelines)
Illustrative Format of key fact statement/fact sheet
(to be provided in a language understood by the borrower)
Date: XXX Name of the Regulated entity: XXX Applicant Name: XXX

Sr. Parameter Details

No. (given for
illustrative
computation
purposes
only)
(i) Loan amount (amount disbursed/to be disbursed to the borrower) (in 20,000
Rupees)
(ii) Total interest charge during the entire tenor of the loan (in Rupees) 3,274
(iii) Other up-front charges, if any (break-up of each component to be given 400
below) (in Rupees)
(a) Processing fees, if any (in Rupees) 160
(b) Insurance charges, if any (in Rupees) 240
(c) Others (if any) (in Rupees) (details to be provided) -
(iv) Net disbursed amount ((i)-(iii)) (in Rupees) 19,600
(v) Total amount to be paid by the borrower (sum of (i), (ii) and (iii)) (in Rupees) 23,674 9
(vi) Annual Percentage Rate - Effective annualized interest rate (in percentage) 17.07%
(computed on net disbursed amount using IRR approach and reducing
balance method)
(vii) Tenor of the Loan (in months/days) 24 months
(viii) Repayment frequency by the borrower Monthly
(ix) Number of instalments of repayment 24
(x) Amount of each instalment of repayment (in Rupees) 970
Details about Contingent Charges
(xi) Rate of annualized penal charges in case of delayed payments (if any)
(xii) Rate of annualized other penal charges (if any); (details to be provided )
Other disclosures
(xiii) Cooling off/look-up period during which borrower shall not be charged any
penalty on prepayment of loan
(xiv) Details of LSP acting as recovery agent and authorized to approach the
borrower
(xv) Name, designation, address and phone number of nodal grievance
redressal officer designated specifically to deal with FinTech/ digital
lending related complaints/ issues

9 The difference in repayment amount calculated from the total of instalments given under the detailed repayment
schedule i.e., ₹23,280 (=970*24) (excluding ₹400 (other up-front charges)) vis-à-vis the amount of ₹23,674 (₹20,000
(loan amount) + ₹3,274 (Interest charges) + ₹400 (other up-front charges) mentioned under (v) is due to rounding off
the instalment amount of ₹969.73 to ₹970 under the detailed repayment schedule.
 Detailed Repayment Schedule (Illustrative)

Instalment Outstanding Principal (in Interest (in Instalment (in

No. Principal (in Rupees) Rupees) Rupees)
Rupees)
1 20,000 720 250 970
2 19,280 729 241 970
3 18,552 738 232 970
4 17,814 747 223 970
5 17,067 756 213 970
6 16,310 766 204 970
7 15,544 775 194 970
8 14,769 785 185 970
9 13,984 795 175 970
10 13,189 805 165 970
11 12,384 815 155 970
12 11,569 825 145 970
13 10,744 835 134 970
14 9,909 846 124 970
15 9,063 856 113 970
16 8,206 867 103 970
17 7,339 878 92 970
18 6,461 889 81 970
19 5,572 900 70 970
20 4,672 911 58 970
21 3,761 923 47 970
22 2,838 934 35 970
23 1,904 946 24 970
24 958 958 12 970
 THE RESERVE BANK - INTEGRATED OMBUDSMAN SCHEME, 2021

A Scheme for resolving customer grievances in relation to services provided by entities

regulated by Reserve Bank of India in an expeditious and cost-effective manner under
Section 35A of the Banking Regulation Act, 1949 (10 of 1949), Section 45L of the
Reserve Bank of India Act, 1934 (2 of 1934) and Section 18 of the Payment and
Settlement Systems Act, 2007 (51 of 2007).

CHAPTER I

PRELIMINARY
1. Short Title, Commencement, Extent and Application
(1) This Scheme may be called the Reserve Bank - Integrated Ombudsman Scheme,
2021.
(2) It shall come into force on such date as the Reserve Bank may specify.
(3) It shall extend to the whole of India.
(4) The Scheme shall apply to the services provided by a Regulated Entity in India to
its customers under the provisions of the Reserve Bank of India Act, 1934, the Banking
Regulation Act, 1949, and the Payment and Settlement Systems Act, 2007.
2. Suspension of the Scheme
(1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or any
of the clauses of the Scheme, either generally or in relation to any specified Regulated
Entity.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it may deem fit.
3. Definitions
(1) In the Scheme, unless the context otherwise requires:
(a) “Appellate Authority” means the Executive Director in-Charge of the
Department of the Reserve Bank administering the Scheme;
(b) “Appellate Authority Secretariat” means the Department in the Reserve
Bank which is administering the Scheme;

1
(c) “Authorised Representative” means a person, other than an advocate, duly
appointed and authorised in writing to represent the complainant in the
proceedings before the Ombudsman;
(d) “Award” means an award passed by the Ombudsman in accordance with
the Scheme;
(e) “bank” means a ‘banking company’, a ‘corresponding new bank’, a ‘Regional
Rural Bank’, ‘State Bank of India’ as defined in the Banking Regulation Act,
1949, a ‘co-operative bank’ as defined in Section 56 (c) of the Banking
Regulation Act, 1949 to the extent not excluded under the Scheme, but does
not include a bank in resolution or winding up or under directions or any other
bank as specified by the Reserve Bank;
(f) “Complaint” means a representation in writing or through other modes
alleging deficiency in service on the part of a Regulated Entity, and seeking
relief under the Scheme;
(g) “Deficiency in service” means a shortcoming or an inadequacy in any
financial service, which the Regulated Entity is required to provide statutorily or
otherwise, which may or may not result in financial loss or damage to the
customer;
(h) “Deputy Ombudsman” means any person appointed by the Reserve Bank
as such under the Scheme;
(i) “Non-Banking Financial Company” (NBFC) means an NBFC as defined in
Section 45-I (f) of the Reserve Bank of India Act, 1934 and registered with the
Reserve Bank, to the extent not excluded under the Scheme, but does not
include a Core Investment Company (CIC), an Infrastructure Debt Fund-Non-
Banking Financial Company (IDF-NBFC), a Non-Banking Financial Company -
Infrastructure Finance Company (NBFC-IFC), a company in resolution or
winding up/liquidation, or any other NBFC specified by the Reserve Bank;
Explanation: The terms CIC and IDF-NBFC shall have the same meaning
assigned to them under the RBI Directions.
(j) “Regulated Entity” means a bank or a Non-Banking Financial Company or
a System Participant as defined in the Scheme, or any other entity as may be
specified by the Reserve Bank from time to time; to the extent not excluded
under the Scheme;

2
 (k) “Settlement” means an agreement reached by the parties to the complaint
by facilitation or conciliation or mediation, as per the provisions of this Scheme;
(l) “System Participant” means a person other than the Reserve Bank and a
System Provider, participating in a payment system as defined in the Payment
and Settlement Systems Act, 2007;
(m) “System Provider” means and includes a person who operates an
authorised payment system as defined in Section 2 of the Payment and
Settlement Systems Act, 2007;
(n) “The Reserve Bank” means Reserve Bank of India constituted under
Section 3 of the Reserve Bank of India Act, 1934.
(2) Words and expressions used and not defined in the Scheme, but defined in the
Reserve Bank of India Act, 1934, or in the Banking Regulation Act, 1949, or in the
Payment and Settlement Systems Act, 2007 or in the Regulations or guidelines or
Directions issued by the Reserve Bank in exercise of its powers conferred by the Acts
referred to herein above, shall have the meanings respectively assigned to them.

3
 CHAPTER II

OFFICES UNDER THE RESERVE BANK - INTEGRATED OMBUDSMAN

SCHEME, 2021

4. Appointment and Tenure of Ombudsman and Deputy Ombudsman

(1) The Reserve Bank may appoint one or more of its officers as Ombudsman and
Deputy Ombudsman, to carry out the functions entrusted to them under the Scheme.
(2) The appointment of Ombudsman or the Deputy Ombudsman, as the case may be,
shall be made for a period not exceeding three years at a time.
5. Location of the Office of the Ombudsman
(1) The offices of the Ombudsman shall be at such places as may be specified by the
Reserve Bank.
(2) In order to expedite disposal of the complaints, the Ombudsman may hold sittings
at such places and in such manner as may be considered necessary and proper in
respect of a complaint.
6. Establishment of a Centralised Receipt and Processing Centre
(1) The Reserve Bank shall establish the Centralised Receipt and Processing Centre
at any place as may be decided by it to receive the complaints filed under the Scheme
and process them.
(2) The complaints under the Scheme made online shall be registered on the portal
(https://cms.rbi.org.in). Complaints in electronic mode (E-mail) and physical form,
including postal and hand-delivered complaints, shall be addressed and sent to the
place where the Centralised Receipt and Processing Centre of the Reserve Bank is
established, for scrutiny and initial processing.
Provided that the complaints that are received directly in any of the offices of
the Reserve Bank shall be forwarded to the Centralised Receipt and Processing
Centre for further action.
7. Staffing of the Offices of Ombudsman and Centralised Receipt and
Processing Centre
The Reserve Bank shall ensure that the offices of the Ombudsman and the Centralised
Receipt and Processing Centre are adequately staffed and shall bear the cost thereof.

4
 CHAPTER III

POWERS AND FUNCTIONS OF THE OMBUDSMAN

8. Powers and Functions
(1) The Ombudsman/Deputy Ombudsman shall consider the complaints of customers
of Regulated Entities relating to deficiency in service.
(2) There is no limit on the amount in a dispute that can be brought before the
Ombudsman for which the Ombudsman can pass an Award. However, for any
consequential loss suffered by the complainant, the Ombudsman shall have the power
to provide a compensation up to Rupees 20 lakh, in addition to, up to Rupees One
lakh for the loss of the complainant’s time, expenses incurred and for
harassment/mental anguish suffered by the complainant.
(3) While the Ombudsman shall have the power to address and close all complaints,
the Deputy Ombudsman shall have the power to close those complaints falling under
clause 10 of the Scheme and complaints settled through facilitation as stated under
clause 14 of the Scheme.
(4) The Ombudsman shall send to the Deputy Governor, Reserve Bank of India, a
report, as on March 31st every year, containing a general review of the activities of the
office during the preceding financial year, and shall furnish such other information as
the Reserve Bank may direct.
(5) The Reserve Bank may, if it considers necessary in the public interest to do so,
publish the report and the information received from the Ombudsman in such
consolidated form or otherwise, as it may deem fit.

5
 CHAPTER IV

PROCEDURE FOR REDRESSAL OF GRIEVANCE UNDER THE SCHEME

9. Grounds of Complaint

Any customer aggrieved by an act or omission of a Regulated Entity resulting in

deficiency in service may file a complaint under the Scheme personally or through an
authorised representative as defined under clause 3(1)(c).

10. Grounds for non-maintainability of a Complaint

(1) No complaint for deficiency in service shall lie under the Scheme in matters
involving:
(a) commercial judgment/commercial decision of a Regulated Entity;
(b) a dispute between a vendor and a Regulated Entity relating to an
outsourcing contract;
(c) a grievance not addressed to the Ombudsman directly;
(d) general grievances against Management or Executives of a Regulated
Entity;
(e) a dispute in which action is initiated by a Regulated Entity in compliance
with the orders of a statutory or law enforcing authority;
(f) a service not within the regulatory purview of the Reserve Bank;
(g) a dispute between Regulated Entities; and
(h) a dispute involving the employee-employer relationship of a Regulated
Entity.

(2) A complaint under the Scheme shall not lie unless:

(a) the complainant had, before making a complaint under the Scheme, made
a written complaint to the Regulated Entity concerned and -
(i) the complaint was rejected wholly or partly by the Regulated Entity, and
the complainant is not satisfied with the reply; or the complainant had not
received any reply within 30 days after the Regulated Entity received the
complaint; and
(ii) the complaint is made to the Ombudsman within one year after the
complainant has received the reply from the Regulated Entity to the

6
 complaint or, where no reply is received, within one year and 30 days from
the date of the complaint.
(b) the complaint is not in respect of the same cause of action which is already-
(i) pending before an Ombudsman or settled or dealt with on merits, by an
Ombudsman, whether or not received from the same complainant or
along with one or more complainants, or one or more of the parties
concerned;
(ii) pending before any Court, Tribunal or Arbitrator or any other Forum or
Authority; or, settled or dealt with on merits, by any Court, Tribunal or
Arbitrator or any other Forum or Authority, whether or not received from
the same complainant or along with one or more of the
complainants/parties concerned;
(c) the complaint is not abusive or frivolous or vexatious in nature;
(d) the complaint to the Regulated Entity was made before the expiry of the
period of limitation prescribed under the Limitation Act, 1963, for such claims;
(e) the complainant provides complete information as specified in clause 11 of
the Scheme;
(f) the complaint is lodged by the complainant personally or through an
authorised representative other than an advocate unless the advocate is the
aggrieved person.
Explanation 1: For the purposes of sub-clause (2)(a), ‘written complaint’ shall include
complaints made through other modes where proof of having made a complaint can
be produced by the complainant.
Explanation 2: For the purposes of sub-clause (2)(b)(ii), a complaint in respect of the
same cause of action does not include criminal proceedings pending or decided
before a Court or Tribunal or any police investigation initiated in a criminal offence.

11. Procedure for Filing a Complaint

(1) The complaint may be lodged online through the portal designed for the purpose
(https://cms.rbi.org.in).
(2) The complaint may also be submitted through electronic or physical mode to the
Centralised Receipt and Processing Centre as notified by the Reserve Bank. The
complaint, if submitted in physical form, shall be duly signed by the complainant or by

7
the authorised representative. The complaint shall be submitted in electronic or
physical mode in such format and containing such information as may be specified by
Reserve Bank.

12. Initial Scrutiny of Complaints

(1) Complaints which are in the nature of offering suggestions or seeking guidance or
explanation shall not be treated as valid complaints under the Scheme and shall be
closed accordingly with a suitable communication to the complainant.
(2) Complaints which are non-maintainable under clause 10 shall be separated to
issue a suitable communication to the complainant.
(3) The remaining complaints shall be assigned to the offices of the Ombudsman for
further examination under intimation to the complainant. A copy of the complaint shall
also be forwarded to the Regulated Entity against whom the complaint is filed with a
direction to submit its written version.

13. Power to Call for Information

(1) The Ombudsman may, for the purpose of carrying out duties under this Scheme,
require the Regulated Entity against whom the complaint has been made or any other
Regulated Entity which is a party to the dispute to provide any information or furnish
certified copies of any document relating to the complaint which are or is alleged to be
in its possession.
Provided that in the event of failure of a Regulated Entity to comply with the
requisition without sufficient cause, the Ombudsman may draw an inference that
the Regulated Entity has no information to furnish.
(2) The Ombudsman shall maintain confidentiality of the information or the documents
coming to its knowledge or possession in the course of discharging duties and shall
not disclose such information or documents to any person except as otherwise
required by law, or with the consent of the person furnishing such information or
documents.
Provided that nothing in this sub-clause shall prevent the Ombudsman from
disclosing information or documents furnished by the parties to the proceedings
to each other, to the extent considered necessary to comply with the principles
of natural justice and fair play:

8
 Provided further that provisions of this sub-clause shall not apply in relation to
the disclosure made or information furnished by the Ombudsman to the
Reserve Bank or filing thereof before any Court, Forum or Authority.

14. Resolution of Complaints

(1) The Ombudsman/Deputy Ombudsman shall endeavour to promote settlement of
a complaint by agreement between the complainant and the Regulated Entity through
facilitation or conciliation or mediation.
(2) The proceedings before the Ombudsman shall be summary in nature and shall not
be bound by any rules of evidence. The Ombudsman may examine either party to the
complaint and record their statement.
(3) The Regulated Entity shall, on receipt of the complaint, file its written version in
reply to the averments in the complaint enclosing therewith copies of the documents
relied upon, within 15 days before the Ombudsman for resolution.
Provided that the Ombudsman may, at the request of the Regulated Entity in
writing to the satisfaction of the Ombudsman, grant such further time as may be
deemed fit to file its written version and documents.
(4) In case the Regulated Entity omits or fails to file its written version and documents
within the time as provided in terms of sub-clause (3), the Ombudsman may proceed
ex-parte based on the evidence available on record and pass appropriate Order or
issue an Award. There shall be no right of appeal to the Regulated Entity in respect of
the Award issued on account of non-response or non-furnishing of information sought
within the stipulated time.
(5) The Ombudsman/Deputy Ombudsman shall ensure that the written version or reply
or documents filed by one party, to the extent relevant and pertaining to the complaint,
are furnished to other party and follow such procedure and provide additional time as
may be considered appropriate.
(6) In case the complaint is not resolved through facilitation, such action as may be
considered appropriate, including a meeting of the complainant with the officials of
Regulated Entity, for resolution of the complaint by conciliation or mediation may be
initiated.
(7) The parties to the complaint shall cooperate in good faith with the
Ombudsman/Deputy Ombudsman, as the case may be, in resolution of the dispute

9
and comply with the direction for production of any evidence and other related
documents within the stipulated time.
(8) If any amicable settlement of the complaint is arrived at between the parties, the
same shall be recorded and signed by both the parties and thereafter, the fact of
settlement may be recorded, annexing thereto the terms of settlement, directing the
parties to comply with the terms within the stipulated time.
(9) The complaint would be deemed to be resolved when:
(a) it has been settled by the Regulated Entity with the complainant upon the
intervention of the Ombudsman; or
(b) the complainant has agreed in writing or otherwise (which may be recorded)
that the manner and the extent of resolution of the grievance is satisfactory; or
(c) the complainant has withdrawn the complaint voluntarily.

15. Award by the Ombudsman

(1) Unless the complaint is rejected under clause 16, the Ombudsman shall pass an
Award in the event of:
(a) non-furnishing of documents/information as enumerated in clause 14(4); or
(b) the matter not getting resolved under clause 14(9) based on records placed, and
after affording a reasonable opportunity of being heard to both the parties.
(2) The Ombudsman shall also take into account, in addition, the principles of banking
law and practice, directions, instructions and guidelines issued by the Reserve Bank
from time to time and such other factors as may be relevant, before passing a
reasoned Award.
(3) The Award shall contain, inter alia, the direction, if any, to the Regulated Entity for
specific performance of its obligations and in addition to or otherwise, the amount, if
any, to be paid by the Regulated Entity to the complainant by way of compensation for
any loss suffered by the complainant.
(4) Notwithstanding anything contained in sub-clause (3), the Ombudsman shall not
have the power to pass an Award directing payment by way of compensation, an
amount which is more than the consequential loss suffered by the complainant or
Rupees 20 lakh whichever is lower. The compensation that can be awarded by the
Ombudsman shall be exclusive of the amount involved in the dispute.

10
(5) The Ombudsman may also award a compensation not exceeding Rupees one lakh
to the complainant, taking into account the loss of the complainant’s time, expenses
incurred, harassment and mental anguish suffered by the complainant.
(6) A copy of the Award shall be sent to the complainant and the Regulated Entity.
(7) The Award passed under sub-clause (1) shall lapse and be of no effect unless the
complainant furnishes a letter of acceptance of the Award in full and final settlement
of the claim to the Regulated Entity concerned, within a period of 30 days from the
date of receipt of the copy of the Award.
Provided that no such acceptance may be furnished by the complainant if he
has filed an appeal under sub-clause (3) of clause 17.
(8) The Regulated Entity shall comply with the Award and intimate compliance to the
Ombudsman within 30 days from the date of receipt of the letter of acceptance from
the complainant, unless it has preferred an appeal under sub-clause (2) of clause 17.

16. Rejection of a Complaint

(1) The Deputy Ombudsman or the Ombudsman may reject a complaint at any stage
if it appears that the complaint made:
(a) is non-maintainable under clause 10; or
(b) is in the nature of offering suggestions or seeking guidance or explanation
(2) The Ombudsman may reject a complaint at any stage if:
(a) in his opinion there is no deficiency in service; or
(b) the compensation sought for the consequential loss is beyond the power of
the Ombudsman to award the compensation as indicated in clause 8(2); or
(c) the complaint is not pursued by the complainant with reasonable diligence;
or
(d) the complaint is without any sufficient cause; or
(e) the complaint requires consideration of elaborate documentary and oral
evidence and the proceedings before the Ombudsman are not appropriate for
adjudication of such complaint; or
(f) in the opinion of the Ombudsman there is no financial loss or damage, or
inconvenience caused to the complainant.

11
17. Appeal before the Appellate Authority
(1) There shall not be any right of appeal to a Regulated Entity for an Award issued
for non-furnishing of documents/information under clause 15(1)(a).
(2) The Regulated Entity may, aggrieved by an Award under clause 15(1)(b) or closure
of a complaint under clauses 16(2)(c) to 16(2)(f), within 30 days of the date of receipt
of communication of Award or closure of the complaint, prefer an appeal before the
Appellate Authority.
(a) Provided that in the case of an appeal by a Regulated Entity, the period of
30 days for filing an appeal shall commence from the date on which the
Regulated Entity receives the letter of acceptance of Award by the complainant:
(b) Provided further that an appeal may be filed by a Regulated Entity only with
the previous sanction of the Chairman or the Managing Director/Chief
Executive Officer or, in their absence, the Executive Director/Official of equal
rank.
(c) Provided that the Appellate Authority may, if he is satisfied that the
Regulated Entity had sufficient cause for not making the appeal within the time,
may allow a further period not exceeding 30 days.

(3) The complainant may, aggrieved by an Award under clause 15(1) or rejection of a
complaint under clauses 16(2)(c) to 16(2)(f), within 30 days of the date of receipt of
the Award or rejection of the complaint, prefer an appeal before the Appellate
Authority.
Provided that the Appellate Authority may, if he is satisfied that the complainant
had sufficient cause for not making the appeal within the time, may allow a
further period not exceeding 30 days.
(4) The Appellate Authority’s Secretariat shall scrutinise and process the Appeal.
(5) The Appellate Authority may, after giving the parties a reasonable opportunity of
being heard:
(a) dismiss the appeal; or
(b) allow the appeal and set aside the Award or order of the Ombudsman; or
(c) remand the matter to the Ombudsman for fresh disposal in accordance with
such directions as the Appellate Authority may consider necessary or proper;
or

12
 (d) modify the order of the Ombudsman or Award and pass such directions as
may be necessary to give effect to the order of the Ombudsman or Award so
modified; or
(e) pass any other order as it may deem fit.
(6) The order of the Appellate Authority shall have the same effect as the Award
passed by Ombudsman under clause 15 or the order rejecting the complaint under
clause 16, as the case may be.

18. Regulated Entity to Display Salient Features of the Scheme for Knowledge
of the Public
(1) The Regulated Entity to which the Scheme is applicable shall facilitate the smooth
conduct of the Scheme by ensuring meticulous adherence to the requirements under
the Scheme, failing which, the Reserve Bank may take such action as it may deem fit.
(2) The Regulated Entity shall appoint a Principal Nodal Officer at their head office
who shall not be a rank less than a General Manager or an officer of equivalent rank
and shall be responsible for representing the Regulated Entity and furnishing
information on behalf of the Regulated Entity in respect of complaints filed against the
Regulated Entity. The Regulated Entity may appoint such other Nodal Officers to
assist the Principal Nodal Officer as it may deem fit for operational efficiency.
(3) The Regulated Entity shall display prominently for the benefit of their customers at
their branches/places where the business is transacted, the name and contact details
(Telephone/mobile number and E-mail ID) of the Principal Nodal Officer along with the
details of the complaint lodging portal of the Ombudsman (https://cms.rbi.org.in).
(4) The Regulated Entity to which the Scheme is applicable shall ensure that the
salient features of the Scheme are displayed prominently in English, Hindi and the
regional language in all its offices, branches and places where the business is
transacted in such a manner that a person visiting the office or branch has adequate
information on the Scheme.
(5) The Regulated Entity shall ensure that a copy of the Scheme is available in all its
branches to be provided to the customer for reference upon request.
(6) The salient features of the Scheme along with the copy of the Scheme and the
contact details of the Principal Nodal Officer shall be displayed and updated on the
website of the Regulated Entity.

13
 CHAPTER V

MISCELLANEOUS
19. Removal of Difficulties
If any difficulty arises in giving effect to the provisions of the Scheme, the Reserve
Bank may make such provisions not inconsistent with the Reserve Bank of India Act,
1934, or the Banking Regulation Act, 1949, or the Payment and Settlement Systems
Act, 2007, or the Scheme, as it may consider necessary or expedient for removing any
difficulty.

20. Repeal of the Existing Schemes and Application to Pending Proceedings

(1) The Banking Ombudsman Scheme, 2006, the Ombudsman Scheme for Non-
Banking Financial Companies, 2018, and the Ombudsman Scheme for Digital
Transactions, 2019, hereby stand repealed.
(2) The adjudication of pending complaints, appeals and execution of the Awards
already passed, as on the date of commencement of the Reserve Bank - Integrated
Ombudsman Scheme, 2021, shall continue to be governed by the provisions of the
respective Ombudsman Schemes and instructions of the Reserve Bank issued
thereunder.

14
 Annex
FORM OF COMPLAINT (TO BE LODGED) WITH THE OMBUDSMAN
[Clause 11(2) of the Scheme]
(TO BE FILLED UP BY THE COMPLAINANT)
All the fields are mandatory except wherever indicated otherwise
To
The Ombudsman

Madam/Sir,

Sub: Complaint against ……………………(place of Regulated Entity’s branch or

office) of ………………………………………………………………………………(name
of the Regulated Entity)

Details of the complaint:

1. Name of the complainant …………………………………………………………….
2. Age (years)………….
3. Gender……..………..
4. Full address of the complainant ………………………………………………………
……………………………………………………………………………………………….
……………………………………………………………………………………………….
Pin Code ………………..
Phone No. (if available)…………….
Mobile Number. .……………………
E-mail (if available) …………………….

5. Complaint against (Name and full address of the branch or office of the Regulated
Entity) ………………………….……………………………………………………………...
………………………………………………………………………………………………….
Pin Code …………………….

6. Nature of relationship/account number (if any) with the Regulated Entity

……………………………………………………………….…………………………………

15
7. Transaction date and details, if available
……………………………………………………………….…………………………………
(a) Date of complaint already made by the complainant to the Regulated Entity
(Please enclose a copy of the complaint)
……………………………………………………………….…………………………………
(b) Whether any reminder was sent by the complainant? Yes/No
(Please enclose a copy of the reminder)
……………………………………………………………….…………………………………
8. Please tick the relevant box (Yes/No)
Whether your complaint:
(i) is sub-judice/under arbitration1? Yes No
(ii) is made through an advocate, except when the advocate is
Yes No
the aggrieved party?
(iii) has already been dealt with or is under process on the same
Yes No
ground with the Ombudsman?
(iv) is in the nature of general complaint/s against Management
Yes No
or Executives of a Regulated Entity?
(v) is on account of a dispute between Regulated Entities? Yes No
(vi) involves employer-employee relationship? Yes No

9. Subject matter of the complaint

………………………………………………………………………………………………….

10. Details of the complaint:

(If space is not sufficient, please enclose a separate sheet)
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………

1 Complaint is sub-judice/under arbitration if the complaint in respect of the same cause of action is already
pending/dealt with on merits by any Court, Tribunal or Arbitrator or any other Authority, whether individually or
jointly.

16
11. Whether any reply has been received from the Regulated Entity within a period of
30 days of receipt of the complaint by it? Yes/No
(if yes, please enclose a copy of the reply)

12. Relief sought from the Ombudsman

…………………………………………………………………………………………………
…………………………………………………………………………………………………
(Please enclose a copy of documentary proof, if any, in support of your claim)

13. Nature and extent of monetary loss, if any, claimed by the complainant by way of
compensation (please refer to clauses 15 (4) & 15 (5) of the Scheme)
Rs.………………………………………………………………………………………………
…………………………………………………………………………………….…………….

14. List of documents enclosed:

Declaration
(i) I/We, the complainant/s herein declare that:
a) the information furnished above is true and correct; and
b) I/We have not concealed or misrepresented any fact stated above, and in the
documents submitted herewith.
(ii) The complaint is filed before the expiry of a period of one year reckoned in
accordance with the provisions of clause 10 (2) of the Scheme.

Yours faithfully
(Signature of the Complainant/Authorised Representative)

17
 AUTHORISATION
If the complainant wants to authorise a representative to appear and make submission
on her/his behalf before the Ombudsman, the following declaration should be
submitted:

I/We …………….. hereby nominate Shri/Smt………………………………………….. as

my/our authorised representative whose contact details are as below:
Full Address …………………………………………………………………………………..
………………………………………………………………………………………………….
………………………………………………………………………………………………….
Pin Code ……………..……………..
Phone No:……………….…………..
Mobile Number. .……………………
E-mail ………………………..………

(Signature of the Complainant)

18
NI Act

138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any
cheque drawn by a person on an account maintained by him with a banker for payment of any
amount of money to another person from out of that account for the discharge, in whole or in
part, of any debt or other liability, is returned by the bank unpaid, either because of the amount
of money standing to the credit of that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account by an agreement made with that
bank, such person shall be deemed to have committed an offence and shall, without prejudice
to any other provision of this Act, be punished with imprisonment for 8[a term which may be
extended to two years’], or with fine which may extend to twice the amount of the cheque, or
with both:
Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of six months from the date on
which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand
for the payment of the said amount of money by giving a notice; in writing, to the drawer of
the cheque, 9[within thirty days] of the receipt of information by him from the bank regarding
the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the
payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of
the receipt of the said notice.
Explanation.—For the purposes of this section, “debt of other liability” means a legally
enforceable debt or other liability.
139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved,
that the holder of a cheque received the cheque of the nature referred to in section 138 for the
discharge, in whole or in part, of any debt or other liability.

140. Defence which may not be allowed in any prosecution under section 138.—It shall not
be a defence in a prosecution for an offence under section 138 that the drawer had no reason to
believe when he issued the cheque that the cheque may be dishonoured on presentment for the
reasons stated in that section.

141. Offences by companies.—(1) If the person committing an offence under section 138 is a
company, every person who, at the time the offence was committed, was in charge of, and was
responsible to, the company for the conduct of the business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against
and punished accordingly:
Provided that nothing contained in this sub-section shall render any person liable to punishment
if he proves that the offence was committed without his knowledge, or that he had exercised
all due diligence to prevent the commission of such offence:
(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act
has been committed by a company and it is proved that the offence has been committed with
the consent or connivance of, or is attributable to, any neglect on the part of, any director,
manager, secretary or other officer of the company, such director, manager, secretary or other
officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded
against and punished accordingly.
Explanation.—For the purposes of this section, —
(a) “company” means anybody corporate and includes a firm or other association of
individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.

142. Cognizance of offences.—2[(1)] Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974),—
(a) no court shall take cognizance of any offence punishable under section 138 except upon a
complaint, in writing, made by the payee or, as the case may be, the holder in due course of the
cheque;
(b) such complaint is made within one month of the date on which the cause of action arises
under clause (c) of the proviso to section 138:
3[Provided that the cognizance of a complaint may be taken by the Court after the prescribed
period, if the complainant satisfies the Court that he had sufficient cause for not making a
complaint within such period;]
(c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first
class shall try any offence punishable under section 138.].
4[(2) The offence under section 138 shall be inquired into and tried only by a court within
whose local local jurisdiction,—
(a) if the cheque is delivered for collection through an account, the branch of the bank where
the payee or holder in due course, as the case may be, maintains the account, is situated; or
(b) if the cheque is presented for payment by the payee or holder in due course, otherwise
through an account, the branch of the drawee bank where the drawer maintains the account, is
situated.
Explanation.—For the purposes of clause (a), where a cheque is delivered for collection at any
branch of the bank of the payee or holder in due course, then, the cheque shall be deemed to
have been delivered to the branch of the bank in which the payee or holder in due course, as
the case may be, maintains the account.]
Payment and settlement Act
S.25.
Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account.—
(1) Where an electronic funds transfer initiated by a person from an account maintained by him
cannot be executed on the ground that the amount of money standing to the credit of that
account is insufficient to honour the transfer instruction or that it exceeds the amount arranged
to be paid from that account by an agreement made with a bank, such person shall be deemed
to have committed an offence and shall, without prejudice to any other provisions of this Act,
be punished with imprisonment for a term which may extend to two years, or with fine which
may extend to twice the amount of the electronic funds transfer, or with both:
Provided that nothing contained in this section shall apply unless—
(a) the electronic funds transfer was initiated for payment of any amount of money to another
person for the discharge, in whole or in part, of any debt or other liability;
(b) the electronic funds transfer was initiated in accordance with the relevant procedural
guidelines issued by the system provider;
(c) the beneficiary makes a demand for the payment of the said amount of money by giving a
notice in writing to the person initiating the electronic funds transfer within thirty days of the
receipt of information by him from the bank concerned regarding the dishonour of the
electronic funds transfer; and
(d) the person initiating the electronic funds transfer fails to make the payment of the said
money to the beneficiary within fifteen days of the receipt of the said notice.
(2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was
initiated for the discharge, in whole or in part, of any debt or other liability.
(3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person,
who initiated the electronic funds transfer through an instruction, authorisation, order or
agreement, did not have reason to believe at the time of such instruction, authorisation, order
or agreement that the credit of his account is insufficient to effect the electronic funds transfer.
(4) The Court shall, in respect of every proceeding under this section, on production of a
communication from the bank denoting the dishonour of electronic funds transfer, presume the
fact of dishonour of such electronic funds transfer, unless and until such fact is disproved.
(5) The provisions of Chapter XVII of the Negotiable Instruments Act, 1881 (26 of 1881) shall
apply to the dishonour of electronic funds transfer to the extent the circumstances admit.
Explanation.—For the purposes of this section, ―debt or other liability means a legally
enforceable debt or other liability, as the case may be.
Project Financing
Wednesday, 26 October 2022 9:08 AM

• There are different projects envisaged by the government - the larger ones need multiple
stakeholders to pitch in to translate it into reality. Often public utility items like transmission
lines, wind turbines, or most commonly highways. To make a flyover, first usually the
government comes out with an ad soliciting bid, the one making the lowest bids eligible would
end up getting the contract (tenders). Other way of going about this is through SPVs (Special
Purpose Vehicles).
○ Like Government+other entity JV - created ad hoc for that special purpose.
○ Public-private partnership model is common.
○ Reduces/isolates risks (since insolvency of the parent company won't affect it)
○ Object is to create the public utility item and so the Government is primarily interested
in getting it done, but don't have the capacity to do it all by themselves - there are
certain economic consequences since they may not have the budgetary capacity to do it,
even if they do it may be a compromise on other equally important projects.
Government wants the work to be done in a manner that isn't unduly delayed (lol)
which is why SPV.
○ In the SPV, Government would do things like procurement of land - making sure the land
is free from all encumbrances in the area that the project is to be set up. They would
also contribute in financing - there could be some form of subsidizing as well. Also
government-backed projects - less risky and increased legitimacy so more likely to invite
investments.
• For a huge project, the private party may not be in a position to fund the project all by
themselves - next best course of action would be to seek funding. From private parties, public
or from lenders.
○ Private parties - different companies/consortiums/NBFCs who put it money, provide
capital with the sole intention of getting returns through equity - they make an
assessment of the risk and the projected cash flow before making the investment to
ensure the viability of the project.
○ SPV could also issue bonds which can be bought by the public with a certain promised
rate of return (India is not really a country where this kind of public funding is done).
○ Lenders is basically banks. They are willing to funding in exchange of collateral -
immovable assets of SPVs mortgaged, or pledged hypothecation.
• Build-own-operate model - the private party holds ownership, and operates it too.
• Build-operate-transfer model - concessional agreement to get some form of revenue like toll
booths, the private party can kind of exploit this to get back the monaayy. Basically trying to
entice the private entity to enter into such an agreement. Ownership is with the SPV at the
beginning and later transfers back to State.
• So like by the nature of the utility of the project itself, even without collateral or security,
many people are willing to invest in it purely on the basis of the utility/yield that it is expected
to provide in the future.
• https://www.adb.org/sites/default/files/publication/159754/trial-balance-ps-financing-road-
projects-india.pdf
• https://uk.practicallaw.thomsonreuters.com/w-010-3756?
transitionType=Default&contextData=(sc.Default)&firstPage=true
• Project Finance Concepts for Project Managers

Debts Page 1
Debts Page 2
RBI Act
Section.45IA
mandatory requirement of registration. 25lakh limit is now made to 2cr.
it was option to register an NBFC prior to this amendment.
Grace period
similar to s.35 r/w s.22 of BRA. same happening with NBFCs for evaluating if the license is to
granted to the NBFC
whether the NBFC will be in a position to pay its depositors or act in a manner not prejudicial
to the customers.
vague. what does detrimental mean?same poblem as public interest in the BRA.
to specifically fix liability on the management. if the BOD is acting in a manner prejudicial to
the interests of the depositors. like the CRB scam, Sahara, Exon (explained by ishaan in class).
Etc
difference between (6)(ii) and (6)(iii). (ii) there might be different kinds of applicants that may
come up before the RBI. additional conditions as part of registration certificate. (iii) mentions
statutory requirements that need to be fulfilled at any cost by the applicants. (ii) is conditions
mentioned at the discretion of the RBI
if these are not fulfilled, the additional or the statutory conditions, this calls for cancellation of
certificate of registration.
parimateria provision to s.35 BRA.
first give the bank time to comply with the provisions and come up with a plan. if that is not
fulfilled, then atleast an opportunity to be heard (PNJ)
Section.45 MC
can this satisfaction be judicially reviewed? should be availble to the nbfc on ground of non-
appplication of mind etc . RBI will say we gave you opportunity to present your case in 45IA
while cancellation of registration. but this does not include opportunity to be heard during
winding up. so the satisfaction is bad. then should an order be passed without the opportunity
to be heard? principles of PNJ? satisfaction to be reasonable and on the prevailing documents
anythign that is specifically mentioned, excludes the alternative itself. which was not the case
in cancellation of license of nbfcs. but is the case with winding up.
liberal interpretation to be given to the party and cannot condemn the party without given an
opportunity to be heard.

judge can say you are not being condemned at this stage bu just initiating a winding up
proceeding. because it is just filing. no impact on rights and liabilities of the party. there shoudl
be a due exercise on teh part of the RBI after evaluating the books of accounts teh following
criteria is failed for hte RBI to initiate winding up porceedings.
 Exhibit 4.1

Date 12th December 2019

NAVIOS MARITIME PARTNERS L.P.

as Borrower

- and –

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1
as Lenders

- and -

ABN AMRO BANK N.V.

as Agent and as Security Trustee

FACILITY AGREEMENT

INCE

PIRAEUS
 INDEX

Clause Page
1 INTERPRETATION 4
2 FACILITY 23
3 POSITION OF THE LENDERS 23
4 DRAWDOWN 23
5 INTEREST 25
6 INTEREST PERIODS 27
7 DEFAULT INTEREST 27
8 REPAYMENT AND PREPAYMENT 30
9 CONDITIONS PRECEDENT 32
10 REPRESENTATIONS AND WARRANTIES 33
11 GENERAL UNDERTAKINGS 36
12 CORPORATE UNDERTAKINGS 41
13 INSURANCE 43
14 SHIP’S COVENANTS 47
15 SECURITY COVER 52
16 PAYMENTS AND CALCULATIONS 53
17 APPLICATION OF RECEIPTS 56
18 APPLICATION OF EARNINGS, LOCATION OF ACCOUNTS 56
19 EVENTS OF DEFAULT 58
20 EXPENSES 62
21 INDEMNITIES 63
22 NO SET-OFF OR TAX DEDUCTION 65
23 ILLEGALITY, ETC 66
24 INCREASED COSTS 66
25 SET-OFF 68
26 TRANSFERS AND CHANGES IN LENDING AND BOOKING OFFICES 68
27 VARIATIONS AND WAIVERS 75
28 NOTICES 76
29 PARALELL DEBT 78
30 SUPPLEMENTAL 79
31 LAW AND JURISDICTION 79
SCHEDULE 1 LENDERS AND COMMITMENTS 78
SCHEDULE 2 DRAWDOWN NOTICE 79
SCHEDULE 3 CONDITION PRECEDENT DOCUMENTS 80
SCHEDULE 4 TRANSFER CERTIFICATE 83
SCHEDULE 5 FORM OF COMPLIANCE CERTIFICATE 87
SCHEDULE 6 SHIP AND THIRD PARTY MANAGER DETAILS 88
THIS AGREEMENT is made on 12th December 2019
BETWEEN
(1) NAVIOS MARITIME PARTNERS L.P., as Borrower;
(2) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;
(3) ABN AMRO BANK N.V., as Agent; and
(4) ABN AMRO BANK N.V., as Security Trustee.

BACKGROUND
(A) The Lenders have agreed to make available to the Borrower a loan in an amount not exceeding the lesser of (i) twenty
three million five hundred thousand Dollars ($23,500,000) and (ii) 50% of the aggregate Fair Market Value of the Ships
(determined in accordance with the provisions contained in Schedule 3, Part B (Paragraph 5) and not earlier than 30
days before the Drawdown Date), in a single advance, for the purpose of enabling the Borrower to on-lend the same to
the Shareholder to finance the acquisition of all the shares in each Guarantor.
(B) The Lenders have agreed to share pari passu in the security to be granted to the Security Trustee pursuant to this
Agreement.

IT IS AGREED as follows:
1 INTERPRETATION
1.1 Definitions. Subject to Clause 1.5, (General Interpretation) in this Agreement (including in the above recitals):
“Account Bank” means ABN AMRO Bank N.V. acting through its branch at Gustav Mahlerlaan 10, 1082 PP
Amsterdam, The Netherlands, or such other bank as may be designated by the Agent as the Account Bank for the
purposes of this Agreement and which is of a rating acceptable to the Lenders, in their sole discretion;
“Account Security Deed” means a deed creating security (i) in respect of the Retention Account and (ii) in respect of
the Earnings Account of each Guarantor, in the agreed form;
“Actual Transfer Date” means, in relation to each Guarantor, the day on which all the shares in each Guarantor are
actually transferred by the Seller to the Shareholder pursuant to the terms of the SPA;
“Affected Lender” has the meaning given in Clause 5.7 (Market disruption);
“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any
other Subsidiary of that Holding Company;
“Agency and Trust Deed” means the agency and trust deed dated the same date as this Agreement and made
between the same parties;
“Agent” means ABN AMRO Bank N.V., duly incorporated under the laws of Netherlands, having its registered office at
Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands, acting for the purposes of this Agreement through its
office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands, (or of such other address as may last have
been notified to the Borrower) or any successor of it appointed under clause 5 (Appointment of a new Servicing Bank)
of the Agency and Trust Deed;

4
“Agreed Form” means, in relation to any document, that document in the form approved in writing by the Agent or
as otherwise approved in accordance with any other approved procedure specified in any relevant provision of any
Finance Document;
“Approved Broker” means each of (i) H. Clarkson & Co. Ltd. of St Magnus House, 3 Lower Thames Street, London
EC3R 6HE, England, (ii) Arrow Sale & Purchase (UK) Limited of Harbour House, Chelsea Harbour, London SW10 0XE,
England, (iii) SSY Valuation Services Limited of Lloyds Chambers, 1 Portsoken Street, London E1 8PH, England,
(iv) Fearnleys of P.O. Box 1158 Sentrum, 0107 Oslo, Norway, (v) Maersk Broker K/S, Midtermolen 1, 2100 Copenhagen,
Denmark, (vi) Braemar Seascope Limited of One Strand, Trafalgar Square, London WC2N 5HR, England, (vii) E.A.
Gibson Shipbrokers Ltd., Audrey House, 16-20 Ely Place, London EC1N 6SN, England, (viii) BRS of 11 Boulevard Jean
Mermoz, 92200 Neuilly-sur-Seine, France and (ix) Howe Robinson Partners of 3rd Floor, 40 Gracechurch St, London
EC3V 0BT, United Kingdom, or such other reputable, independent and first class firm of shipbrokers specialising in the
valuation of vessels of the relevant type requested by the Borrower and agreed upon and appointed by the Agent at its
sole discretion;
“Approved Flag” means the Republic of Liberia, the Republic of Marshall Islands, the Republic of Cyprus, the Republic
of Panama or such other flag as the Agent may, with the authorisation of all the Lenders, in their absolute discretion,
approve as the flag on which a Ship may be registered;
“Approved Flag State” means the Republic of Liberia, the Republic of Marshall Islands, the Republic of Cyprus, the
Republic of Panama or any other country in which the Agent may with the authorisation of all the Lenders, approve
that a Ship be registered;
“Approved Manager” means, in relation to each Ship, Navios Shipmanagement Inc., a corporation incorporated
under the laws of the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake
Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 or any other company Affiliate of the Approved Manager
and/or of Angeliki Frangou which the Agent may, with the authorisation of the Majority Lenders, approve from time to
time as the technical and/or commercial manager of a Ship (such approval not to be unreasonably withheld);
“Availability Period” means the period commencing on the date of this Agreement and ending on the earliest of (a)
31 December 2019 and (b) any date on which (i) the aggregate of the Loan is equal to the Total Commitments or
(ii) the Total Commitments are reduced to zero; or, in each case, such later date as the Agent may, with the
authorisation of all the Lenders, agree with the Borrower;
“Basel III” means:
(a) the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A
global regulatory framework for more resilient banks and banking systems”, “Basel III: International
framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities
operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in
December 2010, each as amended, supplemented or restated;
(b) the rules for global systemically important banks contained in “Global systemically important banks:
assessment methodology and the additional loss absorbency requirement - Rules text” published by the Basel
Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and
(c) any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel
III”;

5
“Basel IV” means any amendment, replacement or refinement of Basel III known or to be known as “Basel IV”;
“Borrower” means Navios Maritime Partners L.P., a limited partnership formed in the Marshall Islands and having its
registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960;
“Business Day” means a day (other than a Saturday and a Sunday) on which commercial banks are open in Athens,
Piraeus, Amsterdam and Rotterdam and, in respect of a day on which:
(a) LIBOR is to be determined, also in London; and
(b) a payment is required to be made under a Finance Document in Dollars, also in New York City;
“Change of Control Event” means the occurrence after the date of this Agreement of any of the following:
(a) the Permitted Owners sell any shares in the Borrower which would reduce the proportion of issued shares
owned by them in aggregate in the Borrower to below 20%; or
(b) the Borrower issues further shares which would reduce the proportion of issued shares in the Borrower owned
by the Permitted Owners in aggregate to below 20%;
“Charter Assignment” means, in relation to any Extended Employment Contract over a Ship, the assignment thereof
in the Agreed Form;
“Code” means the US Internal Revenue Code of 1986, as amended, and the regulations promulgates and rulings
issued thereunder;
“Commitment” means in relation to a Lender, the amount set opposite its name in the second column of Schedule 1,
or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced,
cancelled or terminated in accordance with this Agreement (and “Total Commitments” means the aggregate of the
Commitments of all the Lenders);
“Compliance Certificate” means a certificate in the form set out in Schedule 5 (or in any other form which the
Agent, acting with the authorisation of all the Lenders, approves or requires);
“Confidential Information” means all information relating to a Security Party, the Group, the Finance Documents or
the Loan of which a Creditor Party becomes aware in its capacity as, or for the purpose of becoming, a Creditor Party
or which is received by a Creditor Party in relation to, or for the purpose of becoming a Creditor Party under, the
Finance Documents or the Facility from either:
(a) any member of the Group or any of its advisers; or
(b) another Creditor Party, if the information was obtained by that Creditor Party directly or indirectly from any
member of the Group or any of its advisers,

6
in whatever form, and includes information given orally and any document, electronic file or any other way of
representing or recording information which contains or is derived or copied from such information but excludes
information that:
(i) is or becomes public information other than as a direct or indirect result of any breach by that Creditor
Party of Clauses 26.16 to 26.23 (inclusive) (Confidentiality); or
(ii) is identified in writing at the time of delivery as non-confidential by any member of the Group or any of
its advisers; or
is known by that Creditor Party before the date the information is disclosed to it in accordance with paragraphs (a) or
(b) above or is lawfully obtained by that Creditor Party after that date, from a source which is, as far as that Creditor
Party is aware, unconnected with the Group and which, in either case, as far as that Creditor Party is aware, has not
been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality
“Contractual Currency” has the meaning given in Clause 21.4 (Currency indemnity);
“Contribution” means, in relation to a Lender, the part of the Loan which is owing to that Lender;
“CRD IV” means:
(a) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential
requirements for credit institutions and investment firms and amending regulation (EU) No. 648/2012;
(b) Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of
credit institutions and the prudential supervision of credit institutions and investment firms, amending
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC; and
(c) any other law or regulation which implements Basel III;
“CRR” means Regulations (EU) No. 575/2013 of 26 June 2013 on prudential requirements for credit institutions and
investment firms and amending regulation (EU) No. 648/2012
“Creditor Party” means the Agent, the Security Trustee, or any Lender, whether as at the date of this Agreement or
at any later time;
“Dollars”, “USD”, “US$” and “$” mean the lawful currency for the time being of the United States of America;
“Drawdown Date” means the date requested by the Borrower for the Loan to be made, or (as the context requires)
the date on which the Loan is actually made;
“Drawdown Notice” means a notice in the form set out in Schedule 2 (or in any other form which the Agent approves
or reasonably requires);
“Earnings” means, in relation to a Ship, all moneys whatsoever which are now, or later become, payable (actually or
contingently) to the Borrower or a Guarantor owning such Ship or the Security Trustee and which arise out of the use or
operation of such Ship, including (but not limited to):
(a) except to the extent that they fall within paragraph (b):
(i) all freight, hire and passage moneys;

7
 (ii) compensation payable to the Borrower or the Guarantor which owns that Ship or a Security Party in the
event of requisition of that Ship for hire;
(iii) remuneration for salvage and towage services;
(iv) demurrage and detention moneys;
(v) damages for breach (or payments for variation or termination) of any charterparty or other contract for
the employment of that Ship; and
(vi) all moneys which are at any time payable under any Insurances relating to that Ship in respect of loss of
hire; and
(b) if and whenever that Ship is employed on terms whereby any moneys falling within paragraphs (i) to (vi) are
pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing
arrangement which is attributable to that Ship;
“Earnings Account” means, in relation to each Guarantor, an account in the name of such Guarantor with the
Account Bank designated “[name of relevant Guarantor] - Earnings Account”, or any other account (with that or
another office of the Account Bank or with a bank or financial institution other than the Account Bank) which is
designated by the Agent as such account in relation to that Guarantor for the purposes of this Agreement;
“EBITDA” means the aggregate amount of combined pre-tax profits of the Group before extraordinary or exceptional
items, interest, depreciation and amortisation as shown, at any relevant time, by the Latest Accounts ;
“Environmental Claim” means:
(a) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident
or an alleged Environmental Incident or which relates to any Environmental Law; or
(b) any claim by any other person which relates to an Environmental Incident or to an alleged Environmental
Incident,
and “claim” means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or
not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend
certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;
“Environmental Incident” means:
(a) any release of Environmentally Sensitive Material from a Ship; or
(b) any incident in which Environmentally Sensitive Material is released from a vessel other than a Ship and which
involves a collision between a Ship and such other vessel or some other incident of navigation or operation, in
either case, in connection with which a Ship is actually or potentially liable to be arrested, attached, detained
or injuncted and/or a Ship and/or the Borrower and/or a Guarantor and/or the Approved Manager and/or the Third
Party Manager or any operator or manager of a Ship is at fault or allegedly at fault or otherwise liable to any
legal or administrative action; or
(c) any other incident in which Environmentally Sensitive Material is released otherwise than from a Ship and in
connection with which a Ship is actually or potentially liable to be arrested and/or where the Borrower and/or a
Guarantor and/or the Approved Manager and/or the Third Party Manager and/or any operator or manager of a
Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action;

8
 “Environmental Law” means any law relating to pollution or protection of the environment, to the carriage of
Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;
“Environmentally Sensitive Material” means oil, oil products and any other substance (including any chemical, gas
or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;
“Event of Default” means any of the events or circumstances described in Clause 19.1 (Events of Default);
“Existing Indebtedness” means the outstanding Financial Indebtedness of the Seller under the Existing Loan
Agreement on the Drawdown Date;
“Existing Loan Agreement” means the loan agreement dated 13 December 2013 (as amended and/or
supplemented from time to time) and entered into between (inter alios) (i) the Seller and (ii) the Agent in respect of a
loan facility of up to US$40,000,000 for the purposes therein specified;
“Extended Employment Contract” means, in respect of a Ship, any time charterparty, contract of affreightment or
other contract of employment of such Ship (including the entry of a Ship in any pool) which has a tenor exceeding
twelve (12) months (including any options to renew or extend such tenor);
“Fair Market Value” means, in relation to a Ship, its market value determined in accordance with Clause 15.3
(Valuation of Ship);
“FATCA” means:
(a) sections 1471 to 1474 of the Code or any associated regulations;
(b) any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between
the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation
referred to in paragraph (a) above; or
(c) any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or
(b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority
in any other jurisdiction.
“FATCA Application Date” means:
(a) in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to
payments of interest and certain other payments from sources within the US), 1 July 2014;
(b) in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraph
above, the first date from which such payment may become subject to a deduction or withholding required by
FATCA;
“FATCA Deduction” means a deduction or withholding from a payment under a Finance Document required by or
under FATCA;

9
“FATCA Exempt Party” means a party to a Finance Document that is entitled to receive payments free from any
FATCA Deduction;
“Finance Documents” means collectively:
(a) this Agreement;
(b) the Agency and Trust Deed;
(c) the Guarantees;
(d) the General Assignments;
(e) the Mortgages;
(f) the Account Security Deed;
(g) any Charter Assignments;
(h) the Manager’s Undertakings;
(i) the Shares Pledges;
(j) the Insurances Assignments; and
(k) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower
or any other person as security for, or to establish any form of subordination or priorities arrangement in
relation to, any amount payable to the Creditor Parties under this Agreement or any of the other documents
referred to in this definition including, without limitation, any co-assured assignments of Insurances in respect
of a Ship and any further undertakings and assignments of Insurances in respect of a Ship by any manager or
sub-manager of a Ship;
(and a “Finance Document” means each or, as the context may require, any of them);
“Financial Indebtedness” means, in relation to a person (the “debtor”), a liability of the debtor:
(a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;
(b) under any loan stock, bond, note or other security issued by the debtor;
(c) under any acceptance credit, guarantee or letter of credit facility or dematerialised equivalent made available
to the debtor;
(d) under a financial lease, a deferred purchase consideration arrangement or any other agreement having the
commercial effect of a borrowing or raising of money by the debtor;
(e) under any foreign exchange transaction, any interest or currency swap or any other kind of derivative
transaction entered into by the debtor or, if the agreement under which any such transaction is entered into
requires netting of mutual liabilities, the liability of the debtor for the net amount; or
(f) under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another
person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person

10
“Financial Year” means, each period of 12 months ending on 31 December other than in the case of the first year
which may be such shorter period commencing from the date of incorporation of the relevant company or corporation
or limited partnership or such other date as the Majority Lenders may agree (such agreement not to be unreasonably
withheld);
“General Assignment” means, in relation to a Ship, a general assignment of its Earnings, Insurances and Requisition
Compensation in the Agreed Form (and “General Assignments” means all of them collectively);
“Group” means at any relevant time the Borrower and its Subsidiaries;
“Group Member” means any member of the Group;
“Guarantee” means each guarantee and indemnity to be executed by the relevant Guarantor in favour of the
Security Trustee in the Agreed Form (and “Guarantees” means all of them collectively);
“Guarantor” means each of the following corporations, each of which is incorporated in the Marshall Islands, and has
its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960:
(a) Cronus Shipping Corporation (“Guarantor A”)
(b) Dionysus Shipping Corporation (“Guarantor B”)
(c) Leto Shipping Corporation (“Guarantor C”);
(d) Oceanus Shipping Corporation (“Guarantor D”); and
(e) Prometheus Shipping Corporation (“Guarantor E”);
and “Guarantors” means all of them;
“Holding Company” means, in relation to a company or corporation or limited partnership, any other company or
corporation or limited partnership in respect of which it is a Subsidiary;
“IACS” means the International Association of Classification Societies;
“IAPPC” means, in relation to a Ship, a valid international air pollution prevention certificate for such Ship issued
pursuant to the MARPOL Protocol;
“Indebtedness” means any obligation howsoever arising (whether present or future, actual or contingent, secured or
unsecured as principal, surety or otherwise) for the payment or repayment of money;
“Insurances” means, in relation to a Ship:
(a) all policies and contracts of insurance, including entries of that Ship in any protection and indemnity or war
risks association, which are effected in respect of that Ship, its Earnings or otherwise in relation to it; and
(b) all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a
premium;

11
“Insurances Assignment” means, in respect of each of Ship A, Ship C and Ship E, an assignment of its Insurances
executed or to be executed by any co-assured (other than the relevant Owner) in favour of the Security Trustee in such
form as the Security Trustee may require in its sole discretion, and in the plural means all of them;
“Interest Expense” means, for any relevant financial year, the aggregate interest paid or payable by the Group and
any member thereof on any Indebtedness during such period;
“Interest Period” means a period determined in accordance with Clause 6 (Interest Periods);
“ISM Code” means the International Safety Management Code (including the guidelines on its implementation),
adopted by the International Maritime Organisation as the same may be amended or supplemented from time to time
(and the terms “safety management system”, “Safety Management Certificate” and “Document of
Compliance” have the same meanings as are given to them in the ISM Code);
“ISPS Code” means the International Ship and Port Facility Security Code as adopted by the International Maritime
Organisation (as the same may be amended and supplemented from time to time);
“ISSC” means a valid and current international ship security certificate issued under the ISPS Code;
“Latest Accounts” means, as at the date of calculation or, as the case may be, in respect of an accounting period,
the annual audited consolidated financial statements of the Borrower or the quarterly unaudited consolidated financial
statements of the Borrower, in each case, which the Borrower is obliged to deliver to the Agent pursuant to Clause
11.6 (Provisions of financial statements);
“Lender” means, subject to Clause 26.6 (Lender re-organisation; waiver of Transfer Certificate):
(a) a bank or financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or
through another branch notified to the Agent under Clause 26.14 (Change of lending or booking office)) unless it
has delivered a Transfer Certificate or Certificates covering the entire amounts of its Commitment and its
Contribution; and
(b) the holder for the time being of a Transfer Certificate;
“LIBOR” means, in relation to any period for which an interest rate is to be determined under any provision of a
Finance Document:
(a) the applicable Screen Rate; or
(b) if no Screen Rate is available for that period, the rate per annum determined by the Agent to be the arithmetic
mean (rounded upwards to 4 decimal places) of the rates as supplied to the Agent at its request, quoted by
each Reference Bank to leading banks in the London Interbank Market;
as of 11:00 am London time on the Quotation Day for dollars and for a period comparable to the Interest Period of the
Loan, that part of the Loan or that Unpaid Sum and if any such rate is less than zero LIBOR shall be deemed to be zero;
“Liquidity” means:
(a) cash in hand legally and beneficially owned by any Group Member; and

12
(b) cash deposits legally and beneficially owned by any Group Member and which are deposited with (A) the
Account Bank or (B) any other bank or financial institution,
which in each case is at the free and unrestricted disposal of the relevant Group Member by which it is owned
including any funds held with any bank from time to time to satisfy minimum liquidity requirements;
“Loan” means the principal amount which has been advanced under this Agreement and which is outstanding for the
time being;
“Major Casualty” means, in relation to a Ship, any casualty to such Ship in respect of which the claim or the
aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds
$500,000 or the equivalent in any other currency;
“Majority Lenders” means:
(a) before the Loan has been made, Lenders whose Commitments total 66.67 per cent. or more of the Total
Commitments; and
(b) after the Loan has been made, Lenders whose Contributions total 66.67 per cent. or more of the Loan;
“Management Agreement” means, in respect of each Ship, the management agreement dated 16 November 2007
(as amended and/or otherwise up-dated from time to time) made between the Borrower (on behalf of each Owner) and
the Approved Manager in such form and substance acceptable to the Agent acting with the authorisation of the
Majority Lenders;
“Manager’s Undertaking” means a letter of undertaking in respect of each Ship from the Approved Manager and, in
respect of each of Ship A, Ship C and Ship E, the Third Party Manager, each in the Agreed Form (and “Managers
Undertakings” means all of them collectively);
“Margin” means 4.00 per cent. (4%) per annum;
“MARPOL Protocol” means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International
Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997);
“Maturity Date” means 30 September 2020;
“Maximum Loan Amount” means the lesser of (i) twenty three million five hundred thousand Dollars ($23,500,000)
and (ii) 50% of the aggregate Fair Market Value of the Ships evidenced by the valuations received by the Borrower
under Clause 9.1 (Documents, fees and no default);
“Minimum Liquidity” means, at any relevant time, the aggregate amounts required under clause 12.77 of this
Agreement to be standing to the credit of the Earnings Accounts and/or the Retention Account;
“Mortgage” means, in relation to a Ship, the first preferred mortgage on the Ship under the relevant Approved Flag
including, if appropriate, any deed of covenant collateral thereto, in the Agreed Form (and “Mortgages” means all of
them collectively);
“Negotiation Period” has the meaning given in Clause 5.10 (Negotiation of alternative rate of interest);

13
“Net Debt” means, as at the date of calculation or, as the case may be, for any accounting period, the total debt of
the Group less cash (which shall have the meaning given thereto under US GAAP meaning both restricted and freely
available cash) as at that date or for that period as shown in the Latest Accounts;
“Net Worth” means, at any relevant time, the Total Assets less Total Liabilities;
“Notifying Lender” has the meaning given in Clause 23.1 (Illegality) or 24.1 (Increased Costs) as the context
requires;
“Owner” means, in respect of each Ship, the Guarantor which is at any relevant time the owner thereof;
“Payment Currency” has the meaning given in Clause 21.4 (Currency indemnity);
“Permitted Owners” means any one or more of Navios Maritime Holdings Inc., Navios Maritime Partners L.P., Mrs
Angeliki Frangou and their respective Affiliates;
“Permitted Security Interests” means:
(a) Security Interests created by the Finance Documents;
(b) liens for unpaid master’s and crew’s wages in accordance with usual maritime practice;
(c) liens for salvage;
(d) liens arising by operation of law for not more than 2 months’ prepaid hire under any charter in relation to a Ship
not prohibited by this Agreement;
(e) liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by
operation of law or otherwise in the ordinary course of the operation, repair or maintenance of a Ship, provided
such liens do not secure amounts more than 60 days overdue (unless the overdue amount is being contested
by the relevant Owner in good faith by appropriate steps) and subject, in the case of liens for repair or
maintenance, to Clauses 14.13(h) (Restrictions on chartering, appointments of managers etc.);
(f) any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security
for costs and expenses while the relevant Owner is actively prosecuting or defending such proceedings or
arbitration in good faith by appropriate steps;
(g) Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in
respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate
reserves have been made; and
(h) any right of pledge and/or set off created pursuant to the general banking conditions (algemene
bankvoorwaarden) of ABN AMRO Bank NV;
“Pertinent Document” means:
(a) any Finance Document;
(b) any policy or contract of insurance contemplated by or referred to in Clause 13 (Insurance) or any other
provision of this Agreement or another Finance Document;

14
(c) any other document contemplated by or referred to in any Finance Document; and
(d) any document which has been or is at any time sent by or to the Agent or the Security Trustee in contemplation
of or in connection with any Finance Document or any policy, contract or document falling within paragraphs
(b) or (c);
“Pertinent Jurisdiction”, in relation to a company, means:
(a) England and Wales;
(b) the country under the laws of which the company is incorporated or formed;
(c) a country in which the company has the centre of its main interests or in which the company’s central
management and control is or has recently been exercised;
(d) a country in which the overall net income of the company is subject to corporation tax, income tax or any
similar tax;
(e) a country in which assets of the company (other than securities issued by, or loans to, related companies)
having a substantial value are situated, in which the company maintains a permanent place of business, or in
which a Security Interest created by the company must or should be registered in order to ensure its validity or
priority; and
(f) a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation
to the company or which would have such jurisdiction if their assistance were requested by the courts of a
country referred to in paragraphs (b) or (c);
“Pertinent Matter” means:
(a) any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or
(b) any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a);
and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the
signing of this Agreement or on or at any time after that signing;
“Potential Event of Default” means an event or circumstance which, with the giving of any notice, the lapse of
time, a determination of the Majority Lenders and/or the satisfaction of any other condition, would constitute an Event
of Default;
“Quotation Date” means, in relation to any Interest Period (or any other period for which an interest rate is to be
determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by
leading banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be
determined for delivery on the first day of that Interest Period or other period;
“Reference Banks” means the branch of ABN AMRO Bank N.V. at Gustav Mahlerlaan 10, 1082 PP Amsterdam, The
Netherlands and the London branch of ABN AMRO Bank N.V. or such other banks as may be appointed by the Agent in
consultation with the Borrower;
“Relevant Person” has the meaning given in Clause 19.9 (Relevant Persons);
“Repayment Date” means a date on which a repayment of the Loan is required to be made under Clause 8.1
(Repayment of Loan);

15
“Requisition Compensation” includes all compensation or other moneys payable by reason of any act or event such
as is referred to in paragraph (b) of the definition of “Total Loss”;
“Restricted Countries” means any country or region subject to Sanctions at the relevant time, as notified from time
to time to the Borrower by the Agent, which, as of the date of this Agreement, are Cuba, Iran, North Korea, Sudan,
Syria, the region of Crimea;
“Restricted Person” means a person that is:
(a) listed on, or owned or controlled by a person listed on any Sanctions List;
(b) located in, incorporated under the laws of, or owned or controlled by, or acting on behalf of, a person located in
or organised under the laws of a country or territory that is the target of country-wide Sanctions;
(c) located, domiciled, resident or incorporated in a Restricted Country; or
(d) otherwise a target of Sanctions;
“Retention Account” means an account in the name of the Borrower with the Account Bank designated “ Navios
Maritime Partners LP. - Retention Account”, which is designated by the Agent as such account for the purposes of this
Agreement;
“Sanctions” means any economic or trade sanctions laws, regulations, embargoes or restrictive measures
administered, enacted or enforced by:
(a) the United States government;
(b) the United Nations;
(c) the European Union or any of its Member States including, without limitation, the Netherlands;
(d) the United Kingdom;
(e) any country to which any Security Party or any other member of the Group or any of their Affiliates is bound; or
(f) the respective governmental institutions and agencies of any of the foregoing, including without limitation, the
Office of Foreign Assets Control of the US Department of Treasury (“OFAC”), the United States Department of
State, and Her Majesty’s Treasury (“HMT”) (together “Sanctions Authorities” and each, “Sanctions
Authority”);
“Sanctions List” means the “Specially Designated Nationals and Blocked Persons” list issued by OFAC, the
“Consolidated List of Financial Sanctions Targets and Investment Ban List” issued by HMT, or any similar list issued or
maintained or made public by any of the Sanctions Authorities;
“Screen Rate” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or
any other person which takes over the administration of that rate) for dollars for the relevant period displayed on
pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate), or on the
appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If
such page or service ceases to be available, the Agent may specify another page or service displaying the appropriate
rate after consultation with the Borrower;

16
“Secured Liabilities” means all liabilities which the Borrower, the Security Parties or any of them have, at the date of
this Agreement or at any later time or times, under or in connection with any Finance Document or any judgment
relating to any Finance Document; and for this purpose, there shall be disregarded any total or partial discharge of
these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation,
arrangement or other procedure under the insolvency laws of any country;
“Security Interest” means:
(a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security
interest of any kind;
(b) the security rights of a plaintiff under an action in rem; and
(c) any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position
which is similar, in economic terms, to the position in which B would have been had he held a security interest
over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts
conferred by the standard terms of business of a bank or financial institution;
“Security Party” means the Borrower, the Guarantors, the Shareholder and any other person (except a Creditor Party)
who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity,
executes a document falling within the last paragraph of the definition of “Finance Documents” (other than the
Third Party Manager);
“Security Period” means the period commencing on the date of this Agreement and ending on the date on which the
Agent notifies the Borrower, the Security Parties and the Lenders that:
(a) all amounts which have become due for payment by the Borrower or any Security Party under the Finance
Documents have been paid;
(b) no amount is owing or has accrued (without yet having become due for payment) under any Finance Document;
(c) neither the Borrower or any Security Party has any future or contingent liability under Clause 20 (Expenses), 21
(Indemnities) or 22 (No set-off or tax deduction) or any other provision of this Agreement or another Finance
Document;
“Security Trustee” means ABN AMRO Bank N.V., duly incorporated under the laws of Netherlands, having its
registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands (or of such other address as may last
have been notified to the Borrower) or any successor of it appointed under clause 5 (Appointment of a new Servicing
Bank) of the Agency and Trust Deed;
“Seller” means Navios Europe Inc., a corporation incorporated in the Marshall Islands and having its registered office
at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960;
“Shareholder” means, Navios Maritime Operating L.L.C. a company formed in the Marshall Islands and having its
registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960;
“Shares Pledge” means, in relation to each Guarantor, a deed creating security in respect of the issued share capital
of that Guarantor executed or to be executed by the Shareholder in favour of the Security Trustee in the Agreed Form
and “Shares Pledges” means all of them;

17
“Ship” means each of Ship A, Ship B, Ship C, Ship D and Ship E and “Ships” means all of them;
“SMC” means a safety management certificate issued in respect of a Ship in accordance with Rule 13 of the ISM Code;
“SPA” means the Share Purchase Agreement dated 26 November 2019 pursuant to which all the issued and
outstanding shares in each Guarantor (the “Shares”) will be transferred by the Seller as seller of the Shares to the
Shareholder as buyer of the Shares;
“Subsidiary” has the meaning given in Clause 1.4 (Meaning of “Subsidiary”);
“Total Loss” means, in relation to a Ship:
(a) actual, constructive, compromised, agreed or arranged total loss of such Ship;
(b) requisition for title or other compulsory acquisition including, if that ship is not released therefrom within the
Relevant Period, capture, appropriation, forfeiture, seizure, detention, deprivation or confiscation howsoever for
any reason (but excluding requisition for use or hire) by or on behalf of any government entity or other
competent authority or by pirates, hijackers, terrorists or similar persons; “Relevant Period” means for the
purposes of this definition either (i) ninety (90) days or, (ii) if relevant underwriters confirm in writing (in terms
satisfactory to the Agent) prior to the end of such ninety (90) day period that such capture, seizure, detention or
confiscation will be fully covered (subject to any applicable deductible) by the relevant Owner’s war risks
insurance if continuing for a further period exceeding ten (10) calendar months, the shorter of twelve
(12) months and such period at the end of which cover is confirmed to attach; and
(c) any arrest, capture, seizure or detention of such Ship (including any hijacking or theft) unless it is within 90
days redelivered to the full control of the Owner owning such Ship;
“Total Assets” means, as at the date of calculation or, as the case may be, for any accounting period, the total
assets (based on book values) (which shall have the meaning given thereto under US GAAP) of the Borrower as at that
date or for that period as shown in the Latest Accounts.
“Total Liabilities” means, as at the date of calculation or, as the case may be, for any accounting period, the total
liabilities (which shall have the meaning given thereto under US GAAP) of the Borrower as at that date or for that
period as shown in the Latest Accounts;
“Total Loss Date” means, in relation to a Ship:
(a) in the case of an actual loss of such Ship, the date on which it occurred or, if that is unknown, the date when
such Ship was last heard of;
(b) in the case of a constructive, compromised, agreed or arranged total loss of such Ship, the earliest of:
(i) the date on which a notice of abandonment is given to the insurers; and
(ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower owning
such Ship with such Ship’s insurers in which the insurers agree to treat such Ship as a total loss; and

18
 (c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent
that the event constituting the total loss occurred;
“Transfer Certificate” has the meaning given in Clause 26.2 (Transfer by a Lender); and
“Trust Property” has the meaning given in clause 3.1 (Definition of “Trust Property”) of the Agency and Trust Deed;
and
“US GAAP” means the generally accepted accounting principles applied from time to time in the United States of
America.
Words and expressions defined in Schedule 6 (Ship and Third Party Manager Details) when used in this Agreement
shall have the meanings given to them in Schedule 6 (Ship and Third Party Manager Details) as if the same were set
out in full in this clause 1.1 (Definitions).
1.2 Construction of certain terms. In this Agreement:
“administration notice” means a notice appointing an administrator, a notice of intended appointment and any
other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person
prior to, or in connection with the appointment of an administrator;
“approved” means, for the purposes of Clause 13 (Insurance), approved in writing by the Agent;
“asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to
any revenues or other payment;
“company” includes any partnership, joint venture and unincorporated association;
“consent” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration,
notarisation and legalisation;
“contingent liability” means a liability which is not certain to arise and/or the amount of which remains
unascertained;
a Potential Event of Default is “continuing” if it has not been remedied or waived and an Event of Default is
“continuing” if it has not been waived;
“document” includes a deed; also a letter or fax;
“excess risks” means, in relation to a Ship, the proportion of claims for general average, salvage and salvage
charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured
value being less than the value at which the Ship is assessed for the purpose of such claims;
“expense” means any kind of cost, charge or expense (including all legal costs, out-of-pocket expenses, charges and
expenses) and any applicable value added or other tax;
“law” includes any order or decree, any form of delegated legislation, any treaty or international convention and any
regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its
Security Council;
“legal or administrative action” means any legal proceeding or arbitration and any administrative or regulatory
action or investigation;
“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as
principal or surety or otherwise;

19
 “months” shall be construed in accordance with Clause 1.3 (Meaning of “month”);
“obligatory insurances” means, in relation to a Ship, all insurances effected or which the relevant Owner is obliged
to effect in respect of each Ship, under Clause 13 (Insurance) or any other provision of this Agreement or another
Finance Document;
“parent company” has the meaning given in Clause 1.4 (Meaning of “Subsidiary”);
“person” includes any company; any state, political sub-division of a state and local or municipal authority; and any
international organisation;
“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the
contract of insurance or its terms;
“protection and indemnity risks” means the usual risks covered by a protection and indemnity association
managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or
persons in case of collision which are not recoverable under the hull and machinery policies by reason of the
incorporation in them of clause 6 of the International Hull Clauses (01/11/02 or 01/11/03), clause 8 of the Institute Time
Clauses (Hulls) (1/11/1995 or 1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent
provision;
“regulation” includes any present or future regulation, rule, directive, requirement, request or guideline (whether or
not having the force of law) of any government entity, central bank or any self-regulatory or other supra-national
authority (including, without limitation any present or future regulation, rule, directive, requirement, request or
guideline (whether or not having the force of law) of any government entity, central bank or any self-regulatory or
other supra-national authority (including, without limitation, any regulation implementing or complying with (1) the
“International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the
Basel Committee on Banking Supervision in June 2004, in the form existing on the date of this Agreement (“Basel II”)
and/or (2) Basel III and/or (3) Basel IV and/or (4) any other law or regulation which, at any time and from time to time,
implements and/or amends and/or supplements and/or re-enacts and/or supersedes, whether in whole or in part, Basel
II and/or Basel III and/or Basel IV (including CRD IV and CRR), and whether such implementation, application or
compliance is by any government entity, a lender or any company affiliated to it);
“tax” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any
political sub-division of a state or any local or municipal authority (including any such imposed in connection with
exchange controls), and any connected penalty, interest or fine; and
“war risks” includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02)
or clause 24 of the Institute Time Clauses (Hulls) (1/11/1995) or clause 23 of the Institute Time Clause (Hulls)
(1/10/83).
1.3 Meaning of “month”. A period of one or more “months” ends on the day in the relevant calendar month
numerically corresponding to the day of the calendar month on which the period started (“the numerically
corresponding day”), but:
(a) on the Business Day following the numerically corresponding day if the numerically corresponding day is not a
Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding
the numerically corresponding day; or
(b) on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a
calendar month or if the last calendar month of the period has no numerically corresponding day;

20
 and “month” and “monthly” shall be construed accordingly.
1.4 Meaning of “Subsidiary”. “Subsidiary” of a person means any company or entity directly or indirectly controlled by
such person, and for this purpose “control” means the ownership of more than fifty per cent (50%) of the voting share
capital (or equivalent rights of ownership) of such company or entity.
1.5 General Interpretation. In this Agreement:
(a) references to, or to a provision of, a Finance Document or any other document are references to it as amended
or supplemented, whether before the date of this Agreement or otherwise;
(b) references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement,
whether made before the date of this Agreement or otherwise;
(c) words denoting the singular number shall include the plural and vice versa; and
(d) Clauses 1.1 to 1.5 apply unless the contrary intention appears.
1.6 Headings.
In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings
in that and any other Finance Document shall be entirely disregarded.
1.7 Bail-in
Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding
between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in
connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and
acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued
but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of any such liability into shares or other instruments of ownership that may be
issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in
relation to any such liability.
In this clause:
“Article 55 BRRD” means Article 55 of Directive 2014/59/EU establishing a framework for the recovery and
resolution of credit institutions and investment firms;
“Bail-In Action” means the exercise of any Write-down and Conversion Powers;

21
“Bail-In Legislation” means:
(a) in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55
BRRD, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from
time to time; and
(b) in relation to any state other than such an EEA Member Country or (to the extent that the United Kingdom is not
such an EEA Member Country) the United Kingdom, any analogous law or regulation from time to time which
requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation;
“EEA Member Country” means any member state of the European Union, Iceland, Liechtenstein and Norway.
“EU Bail-In Legislation Schedule” means the document described as such and published by the Loan Market
Association (or any successor person) from time to time.
“Resolution Authority” means any body which has authority to exercise any Write-down and Conversion Powers.
“UK Bail-In Legislation” means (to the extent that the United Kingdom is not an EEA Member Country which has
implemented, or implements, Article 55 BRRD) Part I of the United Kingdom Banking Act 2009 and any other law or
regulation applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or
other financial institutions or their affiliates (otherwise than through liquidation, administration or other insolvency
proceedings); and
“Write-down and Conversion Powers” means:
(a) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the
powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule;
(b) in relation to any other applicable Bail-In Legislation:
(i) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a
bank or investment firm or other financial institution or affiliate of a bank, investment firm or other
financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any
contract or instrument under which that liability arises, to convert all or part of that liability into shares,
securities or obligations of that person or any other person, to provide that any such contract or
instrument is to have effect as if a right had been exercised under it or to suspend any obligation in
respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary
to any of those powers;
(ii) any similar or analogous powers under that Bail-In Legislation; and
(c) in relation to any UK Bail-In Legislation:
(i) any powers under that UK Bail-In Legislation to cancel, transfer or dilute shares issued by a person that
is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other
financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any
contract or instrument under which that liability arises, to convert all or part of that liability into shares,
securities or obligations of that person or any other person, to provide that any such contract or
instrument is to have effect as if a right had been exercised under it or to suspend any obligation in
respect of that liability or any of the powers under that UK Bail-In Legislation that are related to or
ancillary to any of those powers; and
(ii) any similar or analogous powers under that UK Bail-In Legislation.

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2 FACILITY
2.1 Amount of facility. Subject to the other provisions of this Agreement, the Lenders shall make available to the
Borrower a loan facility in an aggregate amount not exceeding the Maximum Loan Amount for the purpose of enabling
the Borrower to on-lend the same to the Shareholder to finance the acquisition of all the shares in each Guarantor.
2.2 Lenders’ participations in Loan. Subject to the other provisions of this Agreement, each Lender shall participate in
the Loan in the proportion which, as at the Drawdown Date, its Commitment bears to the Total Commitments.
2.3 Purpose of Loan. The Borrower undertakes with each Creditor Party to use the Loan only for the purpose stated in
the preamble to this Agreement.
3 POSITION OF THE LENDERS
3.1 Interests several. The rights of the Lenders under this Agreement are several.
3.2 Individual right of action. Each Lender shall be entitled to sue for any amount which has become due and payable
by the Borrower to it under this Agreement without joining the Agent, the Security Trustee or any other Lender as
additional parties in the proceedings.
3.3 Proceedings requiring Majority Lender consent. Except as provided in Clause 3.2 (Individual right of action), no
Lender may commence proceedings against the Borrower or any Security Party in connection with a Finance Document
without the prior consent of the Majority Lenders.
3.4 Obligations several. The obligations of the Lenders under this Agreement are several; and a failure of a Lender to
perform its obligations under this Agreement shall not result in:
(a) the obligations of the other Lenders being increased; nor
(b) the Borrower, any Security Party, any other Lender being discharged (in whole or in part) from its obligations
under any Finance Document;
and in no circumstances shall a Lender have any responsibility for a failure of another Lender to perform its
obligations under this Agreement.
4 DRAWDOWN
4.1 Request for Loan. Subject to the following conditions, the Borrower may request the Loan to be made by ensuring
that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. (Rotterdam time) 3 Business Days
prior to the intended Drawdown Date.
4.2 Availability. The conditions referred to in Clause 4.1 (Request for Loan) are that:
(a) the Drawdown Date has to be a Business Day during the Availability Period;

23
 (b) the amount of the Loan shall not exceed the amount set out in Clause 2.1 (Amount of facility); and
(c) all applicable conditions precedent set out in Clause 9.1 (Documents, fees and no default) shall have been
fulfilled.
4.3 Notification to Lenders of receipt of the Drawdown Notice. The Agent shall promptly notify the Lenders that it
has received the Drawdown Notice and shall inform each Lender of:
(a) the amount of the Loan and the Drawdown Date;
(b) the amount of that Lender’s participation in the Loan; and
(c) the duration of the Interest Period.
4.4 Drawdown Notice irrevocable. The Drawdown Notice must be signed by a director or an authorised signatory of the
Borrower; and once served, the Drawdown Notice cannot be revoked without the prior consent of the Agent, acting on
the authority of the Majority Lenders.
4.5 Lenders to make available Contributions. Subject to the provisions of this Agreement, each Lender shall, on and
with value on the Drawdown Date, make available to the Agent the amount due from that Lender under Clause 2.2
(Lender’s participation in Loan).
4.6 Disbursement of Loan. Subject to the provisions of this Agreement, the Agent shall on the Drawdown Date pay to
the Borrower for on-payment to the Shareholder the amounts which the Agent receives from the Lenders under Clause
4.5 above; and that payment to the Borrower shall be made:
(a) to the account which the Borrower specifies in the Drawdown Notice; and
(b) in the like funds as the Agent received the payments from the Lenders.
4.7 Disbursement of Loan to third party. A payment by the Agent under Clause 4.6 (Disbursement of Loan) above
shall constitute the making of the Loan and the Borrower shall thereupon become indebted, as principal and direct
Security Party, to each Lender in an amount equal to that Lender’s Contribution.
4.8 Use of proceeds
(a) the Creditor Parties shall have no responsibility for the Borrower’s use of the proceeds of the Loan.
(b) the Borrower shall not, and shall procure that no Security Party or other Group Member or any affiliate of any of
them shall, permit or authorise any other person to, directly or indirectly, use, lend, make payments of,
contribute or otherwise make available, all or any part of the proceeds of the Loan or other transactions
contemplated by this Agreement to fund or facilitate trade, business or other activities: (i) involving or for the
benefit of any Restricted Person; or (ii) in any other manner that could result in the Borrower, any other Security
Party or a Creditor Party being in breach of any Sanctions or becoming a Restricted Person.
4.9 Cancellation. If any part of the Commitment has not been drawn down under this Agreement at the end of the
Availability Period, such undrawn portion shall, on the day following the last day of the applicable Availability Period,
be permanently and irrevocably cancelled; it is hereby agreed that any undrawn portion of any part of the Total
Commitments at the end of the Availability Period shall, on the day following the last day of the Availability Period, be
permanently and irrevocably cancelled.

24
5 INTEREST
5.1 Payment of normal interest. Subject to the provisions of this Agreement, interest on the Loan shall be paid by the
Borrower on the last day of the Interest Period.
5.2 Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest on the Loan in respect of an
Interest Period shall be the aggregate of (a) the Margin and (b) LIBOR for that Interest Period.
5.3 Payment of accrued interest. In the case of an Interest Period of longer than 3 months, accrued interest shall be
paid every 3 months during that Interest Period and on the last day of that Interest Period.
5.4 Notification of Interest Periods and rates of normal interest. The Agent shall notify the Borrower and each
Lender of:
(a) each rate of interest; and
(b) the duration of each Interest Period;
as soon as reasonably practicable after each is determined.
5.5 Obligation of Reference Banks to quote. A Reference Bank which is a Lender shall use all reasonable efforts to
supply any quotation required of it for the purposes of fixing a rate of interest under this Agreement.
5.6 Absence of quotations by Reference Banks. If any Reference Bank fails to supply a quotation when it is required
to do so, the Agent shall determine the relevant LIBOR on the basis of the quotations supplied by the other Reference
Bank or Banks; but if 2 or more of the Reference Banks fail to provide a quotation, the relevant rate of interest shall be
determined by the Agent.
5.7 Market disruption. The following provisions of this Clause 5 (Interest) apply if:
(a) no Screen Rate is available for an Interest Period and 2 or more of the Reference Banks do not before 1.00 p.m.
(London time) on the Quotation Date provide quotations to the Agent in order to fix LIBOR; or
(b) at least 1 Business Day before the start of an Interest Period, Lenders having Contributions together amounting
to more than 50 per cent. of the Loan (or, if no part of the Loan has been drawn, Lenders having Commitments
amounting to more than 50 per cent. of the aggregate of the Total Commitments) notify the Agent that by
reason of changes affecting the London Interbank Market, adequate and fair means do not exist for determining
the rate of interest on the Loan (or part of it) for that Interest Period at or about 1.00 p.m. (London time) on the
Quotation Date for the Interest Period; or
(c) at least 1 Business Day before the start of an Interest Period, the Agent is notified by a Lender (the “Affected
Lender”) that for any reason it is unable to obtain Dollars in the London Interbank Market in order to fund its
Contribution, as the case may be (or any part of it) during that Interest Period.
5.8 Notification of market disruption. The Agent shall promptly notify the Borrower and each of the Lenders stating
the circumstances falling within Clause 5.7 (Market Disruption) which have caused its notice to be given.

25
5.9 Suspension of drawdown. If the Agent’s notice under Clause 5.8 (Notification of market disruption) above is served
before the Loan is to be made:
(a) in a case falling within Clauses 5.7(a) or (b) (Market disruption), the Lenders’ obligations to make the Loan;
(b) in a case falling within Clause 5.7(c) (Market disruption), the Affected Lender’s obligation to participate in the
Loan,
(i) in the case of Clause 5.9(a), shall be made on the basis of an alternative interest rate and interest period which the
Lenders or (as the case may be) the Affected Lender may select as cost of funding of the Lenders or (as the case may
be) the Affected Lender, in Dollars or in any available currency of their or its Contribution plus the Margin and Clauses
5.10 (Negotiation of alternative rate of interest), 5.11 (Application of agreed alternative rate of interest), 5.12
(Alternative rate of interest in absence of agreement) and 5.13 (Notice of prepayment) shall apply; and (ii) in the case
of Clause 5.9(b), shall be suspended while the circumstances referred to in the Agent’s notice continue and thereafter
Clauses 5.10 (Negotiation of alternative rate of interest), 5.11 (Application of agreed alternative rate of interest), 5.12
(Alternative rate of interest in absence of agreement) and 5.13 (Notice of prepayment) shall apply.
5.10 Negotiation of alternative rate of interest. If the Agent serves a notice under Clause 5.8, the Borrower, the Agent
and the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within the 30
days after the date on which the Agent serves its notice under Clause 5.8 (Notification of market disruption) (the
“Negotiation Period”), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as
the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period
concerned.
5.11 Application of agreed alternative rate of interest. Any alternative interest rate or an alternative basis which is
agreed during the Negotiation Period shall take effect in accordance with the terms agreed.
5.12 Alternative rate of interest in absence of agreement. If an alternative interest rate or alternative basis is not
agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation
Period, then the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an
interest period and interest rate representing the cost of funding of the Lenders or (as the case may be) the Affected
Lender in Dollars or in any available currency of their or its Contribution plus the Margin; and the procedure provided
for by this Clause 5.12 shall be repeated if the relevant circumstances are continuing at the end of the interest period
so set by the Agent.
5.13 Notice of prepayment. If the Borrower does not agree with an interest rate set by the Agent under Clause 5.12
(Alternative rate of interest in absence of agreement), the Borrower may give the Agent not less than 15 Business
Days’ notice of their intention to prepay at the end of the interest period set by the Agent (in the case where a notice
has been served under Clause 5.8 (Notification of market disruption) after the Loan has been made available) or the
Borrower may notify the Agent of their intention not to proceed with the relevant drawdown (in the case where a
notice has been served under Clause 5.8 (Notification of market disruption) prior to making the Loan).
5.14 Prepayment; termination of Commitments. A notice under Clause 5.13 (Notice of prepayment) above shall be
irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the
Borrower’s notice of intended prepayment; and:
(a) on the date on which the Agent serves that notice, the Total Commitments or (as the case may require) the
Commitment of the Affected Lender so far as they relate to the Loan shall be cancelled; and

26
 (b) on the last Business Day of the interest period set by the Agent, the Borrower shall prepay (without premium or
penalty) the Loan or, as the case may be, the Affected Lender’s Contribution, together with accrued interest
thereon at the applicable rate plus the Margin.
5.15 Application of prepayment. The provisions of Clause 8 (Repayment and prepayment) shall apply in relation to the
prepayment.
6 INTEREST PERIODS
6.1 Interest Periods. The first Interest Period shall commence on the Drawdown Date and shall terminate
simultaneously with the then current Interest Period and thereafter each subsequent Interest Period shall commence
on the expiry of the preceding Interest Period and each Interest Period shall be:
(a) 3 months; or
(b) such other period as the Agent may, with the authorisation of all the Lenders, agree with the Borrower;
provided that in respect of an amount due to be repaid under Clause 8.1 (Repayment of Loan) on a particular
Repayment Date, an Interest Period relating to the Loan shall end on that Repayment Date.
6.2 Non-availability of matching deposits for Interest Period selected. If, after the Borrower has selected and the
Lenders have agreed an Interest Period longer than 3 months, any Lender notifies the Agent by 11.00 a.m. (Rotterdam
time) on the third Business Day before the commencement of that Interest Period that it is not satisfied that deposits
in Dollars for a period equal to that Interest Period will be available to it in the London Interbank Market when that
Interest Period commences, that Interest Period shall be of 3 months.
7 DEFAULT INTEREST
7.1 Payment of default interest on overdue amounts. The Borrower shall pay interest in accordance with the
following provisions of this Clause 7 on any amount payable by the Borrower under any Finance Document which the
Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:
(a) the date on which the Finance Documents provide that such amount is due for payment; or
(b) if a Finance Document provides that such amount is payable on demand, the date on which the demand is
served; or
(c) if such amount has become immediately due and payable under Clause 19.4 (Acceleration of liabilities), the
date on which it became immediately due and payable.
7.2 Default rate of interest. Interest shall accrue on an overdue amount from (and including) the relevant date until the
date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 2 per
cent. above:
(a) in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or

27
 (b) in the case of any other overdue amount, the rate set out at Clause 7.3(b) (Calculation of default rate of
interest).
7.3 Calculation of default rate of interest. The rates referred to in Clause 7.2 (Default rate of interest) above are:
(a) the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any
unexpired part of any then current Interest Period applicable to it);
(b) the Margin plus, in respect of successive periods of any duration (including at call) up to 3 months which the
Agent may select from time to time:
(i) LIBOR; or
(ii) if the Agent determines that Dollar deposits for any such period are not being made available to any
Reference Bank by leading banks in the London Interbank Market in the ordinary course of business, a
rate from time to time determined by the Agent by reference to the cost of funds to the relevant Lenders
from such other sources as the Agent (after consultation with the Reference Bank) may from time to
time determine.
7.4 Notification of interest periods and default rates. The Agent shall promptly notify the Lenders and the Borrower
of each interest rate determined by the Agent under Clause 7.3 (Calculation of default rate of interest) above and of
each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply
that the Borrower is liable to pay such interest only with effect from the date of the Agent’s notification.
7.5 Payment of accrued default interest. Subject to the other provisions of this Agreement, any interest due under
this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall
be made to the Agent for the account of the Creditor Party to which the overdue amount is due.
7.6 Compounding of default interest. Any such interest which is not paid at the end of the period by reference to
which it was determined shall thereupon be compounded.
7.7 Replacement of Screen Rate.
(a) An amendment or waiver which relates to the rights or obligations of the Agent, the Security Agent or a
Reference Bank (each in their capacity as such) may not be effected without the consent of the Agent, the
Security Agent or that Reference Bank.
(b) Subject to (a) above, if a Screen Rate Replacement Event has occurred in relation to any Screen Rate for a
currency which can be selected for the Loan, any amendment or waiver which relates to:
(i) providing for the use of a Replacement Benchmark in relation to that currency in place of (or in addition
to) the affected Screen Rate; and
(ii)
(A) aligning any provision of any Finance Document to the use of that Replacement Benchmark;
(B) enabling that Replacement Benchmark to be used for the calculation of interest under this
Agreement (including, without limitation, any consequential changes required to enable that
Replacement Benchmark to be used for the purposes of this Agreement);

28
 (C) implementing market conventions applicable to that Replacement Benchmark;
(D) providing for appropriate fallback (and market disruption) provisions for that Replacement
Benchmark; or
(E) adjusting the pricing to reduce or eliminate, to the extent reasonably practicable, any transfer of
economic value from one party to another as a result of the application of that Replacement
Benchmark (and if any adjustment or method for calculating any adjustment has been formally
designated, nominated or recommended by the Relevant Nominating Body, the adjustment shall
be determined on the basis of that designation, nomination or recommendation),
may be made with the consent of the Agent (acting on the instructions of the Majority Lenders) and the
Borrower.
In this Clause 7.7 (Replacement of Screen Rate):
“Relevant Nominating Body” means any applicable central bank, regulator or other supervisory authority or a group
of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or
the Financial Stability Board.
“Replacement Benchmark” means a benchmark rate which is:
(a) formally designated, nominated or recommended as the replacement for a Screen Rate by:
(i) the administrator of that Screen Rate (provided that the market or economic reality that such benchmark
rate measures is the same as that measured by that Screen Rate); or
(ii) any Relevant Nominating Body,
and if replacements have, at the relevant time, been formally designated, nominated or recommended under
both paragraphs, the “Replacement Benchmark” will be the replacement under paragraph (ii) above;
(b) in the opinion of the Majority Lenders and the Borrower, generally accepted in the international or any relevant
domestic syndicated loan markets as the appropriate successor to a Screen Rate; or
(c) in the opinion of the Majority Lenders and the Borrower, an appropriate successor to a Screen Rate.
“Screen Rate Replacement Event” means, in relation to a Screen Rate:
(a) the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Majority
Lenders materially changed;
(b)
(iii)

29
 (A) the administrator of that Screen Rate or its supervisor publicly announces that such administrator
is insolvent; or
(B) information is published in any order, decree, notice, petition or filing, however described, of or
filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or
judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,
provided that, in each case, at that time, there is no successor administrator to continue to provide that
Screen Rate;
(iv) the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that
Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue
to provide that Screen Rate;
(v) the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has
been or will be permanently or indefinitely discontinued; or
(vi) the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be
used; or
(c) in the opinion of the Majority Lenders and the Agent, that Screen Rate is otherwise no longer appropriate for the
purposes of calculating interest under this Agreement.
8 REPAYMENT AND PREPAYMENT
8.1 Repayment of Loan. The Borrower shall repay the Loan by:
(a) three (3) consecutive three-monthly instalments, each in an amount equal to $1,000,000; and
(b) a balloon instalment in an amount equal to $20,500,000.
8.2 Repayment Dates. The first instalment shall be repaid on the earlier of (a) 30 March 2020 and (b) three (3) months
following the Drawdown Date and the third instalment and the balloon instalment shall be repaid on the Maturity Date.
8.3 Final Repayment Date. On the final Repayment Date, the Borrower shall additionally pay to the Agent for the
account of the Creditor Parties all other sums then accrued or owing under any Finance Document.
8.4 Voluntary prepayment. Subject to the following conditions, the Borrower may prepay the whole or any part of the
Loan on the last day of an Interest Period.
8.5 Conditions for voluntary prepayment. The conditions referred to in Clause 8.4 are that:
(a) a partial prepayment shall be in an amount of $500,000 or a higher integral multiple of $500,000;
(b) the Agent has received from the Borrower at least 10 Business Days’ prior written notice specifying the date on
which the prepayment is to be made;

30
 (c) the Borrower has provided evidence satisfactory to the Agent that any consent required by the Borrower or any
Security Party in connection with the prepayment has been obtained and remains in force, and that any
requirement relevant to this Agreement which affects the Borrower or any Security Party has been complied
with; and
(d) the amount of the instalment by which the Loan shall be prepaid, including the balloon instalment, under
Clause 8.1(Repayment of Loan) on any such scheduled repayment dates (as reduced by any earlier operation
of this Clause 8.5, Clause 8.13 (Conditions of cancellation of Commitments) and Clause 8.16 (Adjustments of
scheduled repayments)) shall be reduced in inverse order of maturity, in order of maturity or pro rata at the
Borrower’s option.
8.6 Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended without the consent of
the Agent, given with the authorisation of the Majority Lenders, and the amount specified in the prepayment notice
shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.
8.7 Notification of notice of prepayment. The Agent shall notify the Lenders promptly upon receiving a prepayment
notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrower under
Clause 8.5(c) (Conditions for voluntary prepayment).
8.8 Mandatory prepayment. The Borrower shall be obliged to prepay the portion of the Loan specified in Clause 8.9
(Amounts of mandatory prepayments):
(a) if a Ship is sold or refinanced by any bank or financial institution, on or before the date on which the sale is
completed by delivery of such Ship to the relevant buyer or the funds under the refinancing arrangement are
drawn down respectively; or
(b) if, after delivery (if applicable), a Ship becomes a Total Loss, on the earlier of the date falling 120 days (or such
longer period as the Agent, acting on the instructions of the Majority Lenders, may agree (such consent not to
be unreasonably withheld)) after the Total Loss Date and the date of receipt by the Security Trustee of the
proceeds of insurance relating to such Total Loss.
8.9 Amounts of mandatory prepayments. The amount of the Loan to be prepaid in the circumstances contemplated in
Clause 8.8 (Mandatory prepayment) above is the greatest of:
(a) the amount of the sale or Total Loss proceeds payable in respect of such sale or Total Loss or the amount which
is being prepaid due to the refinancing of any part of the Loan by any bank or financial institution;
(b) an amount that, if the ratio set out in Clause 15.1 (Minimum required security cover) were applied immediately
following the making of such prepayment, the Borrower would not be obliged to provide additional security or
prepay part of the Loan under that Clause; and
(c) an amount so that if the ratio of (i) the aggregate of the Fair Market Value (determined as provided in Clause
15.3 (Valuation of a Ship)) of the Ships plus the net realisable value of any additional security previously
provided under Clause 15 (Security cover) to (ii) the Loan is the same after such prepayment is made as it was
before such prepayment is made.
8.10 Mandatory prepayment – Loan. The Borrower shall be obliged to prepay the whole Loan, and any undrawn part of
the Total Commitment shall be cancelled upon:
(a) the circumstances referred to in Clause 23 (Illegality etc) arising, and in accordance with that Clause; or
(b) there occurs any Change of Control Event.

31
8.11 Amounts payable on prepayment. A prepayment shall be made together with accrued interest (and any other
amount payable under Clause 21 (Indemnities) or otherwise) in respect of the amount prepaid and, if the prepayment
is not made on the last day of an Interest Period applicable thereto, together with any sums payable under Clause
21.1(c) (Indemnities) but without premium or penalty.
8.12 Voluntary cancellation of Commitments. Subject to the following conditions, the Borrower may cancel the whole
or any part of the Total Commitment.
8.13 Conditions for cancellation of Commitments. The conditions referred to in Clause 8.12 (Voluntary cancellation of
Commitments) above are that:
(a) a partial cancellation shall be $500,000 or a higher integral multiple of $500,000;
(b) the Agent has received from the Borrower at least 10 Business Days’ prior written notice specifying the amount
of the Total Commitments to be cancelled and the date on which the cancellation is to take effect; and
(c) the amount of the instalments by which the Loan shall be repaid, including the balloon instalment, under
Clause 8.1 (Repayment of Loan) on any such scheduled repayment dates (as reduced by any earlier operation
of this Clause 8.13, Clause 8.5 (Conditions for voluntary prepayment) and Clause 8.16 (Adjustments of
scheduled repayments)) shall be reduced pro rata.
8.14 Effect of notice of cancellation. The service of a cancellation notice given under Clause 8.13(b) (Conditions for
cancellation of Commitments) shall cause the amount of the Total Commitments specified in the notice to be
permanently cancelled, following which the Commitment of each Lender shall be reduced pro rata.
8.15 No re-borrowing. No amount prepaid or cancelled under Clauses 8.4 (Voluntary prepayment), 8.8 (Mandatory
prepayment) and 8.12 (Voluntary cancellation of Commitments) may be re-borrowed.
8.16 Adjustment of scheduled repayments. If the Total Commitment has been partially reduced or cancelled under this
Agreement and/or any part of the Loan is prepaid (other than under Clause 8.1 (Repayment of Loan), Clause 8.4
(Voluntary prepayment) and Clause 8.12 (Voluntary cancellation of Commitments)) before any scheduled repayment
date and/or the aggregate amount advanced to the Borrower is less than the Maximum Loan Amount, the amount of
the instalment by which the Loan shall be repaid, including the balloon instalment, under Clause 8.1 (Repayment of
Loan) on any such scheduled repayment dates (as reduced by any earlier operation of this Clause 8.16) shall be
reduced pro rata unless the Agent agrees otherwise in writing.
9 CONDITIONS PRECEDENT
9.1 Documents, fees and no default. Each Lender’s obligation to contribute to the Loan is subject to the following
conditions precedent:
(a) that on or before the date of execution of this Agreement, the Agent receives the documents described in Part
A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;
(b) that, on or before the Drawdown Date in respect of the Loan to be made available hereunder, but prior to the
making of the Loan, the Agent receives the documents described in Part B of Schedule 3 in form and substance
satisfactory to it and its lawyers;

32
 (c) that, on or before the Drawdown Date, the Agent receives any fees and expenses that are due and payable
under Clause 20 (Expenses);
(d) that both at the date of the Drawdown Notice and the Drawdown Date:
(i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the
borrowing of the Loan;
the representations and warranties in Clause 10 (Representations and Warranties) and those of the Borrower or any
Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each
of those dates with reference to the circumstances then existing; and
none of the circumstances contemplated by Clause 5.7 (Market disruption) has occurred and is continuing;
(e) that, if the ratio set out in Clause 15.1 (Minimum required security cover) were applied immediately following
the making of the Loan, the Borrower would not be obliged to provide additional security or prepay part of the
Loan under that Clause; and
(f) that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and
documents in connection with the Finance Documents which the Agent may, with the authorisation of the
Majority Lenders, request by notice to the Borrower prior to the Drawdown Date.
9.2 Waiver of conditions precedent. If the Majority Lenders, at their discretion, permit the Loan to be borrowed before
certain of the conditions referred to in Clause 9.1 (Documents, fees and no default) are satisfied, the Borrower
undertakes to ensure that such conditions are satisfied within such period and on such terms as the Agent may specify
in writing.
9.3 Conditions Subsequent. The Borrower undertakes to deliver or to cause to be delivered to the Agent on, or as soon
as practicable after, the Drawdown Date the additional documents and other evidence listed in Part C (Conditions
Subsequent) of Schedule 3.
10 REPRESENTATIONS AND WARRANTIES
10.1 General. The Borrower represents and warrants to each Creditor Party as follows.
10.2 Status.
(a) The Borrower is duly formed and validly existing under the laws of the Republic of Marshall Islands as a limited
partnership; and
(b) each Guarantor is duly incorporated and validly existing under the laws of the Republic of the Marshall Islands.
10.3 Share capital and ownership. The legal title and ownership of all the issued shares in each Guarantor is held by the
Shareholder and the ultimate beneficial ownership of all the issued shares in each Guarantor is held by the Borrower,
free of any Security Interest or other claim other than any Permitted Security Interests.

33
10.4 Corporate power. The Borrower and each Security Party has the corporate capacity, and has taken all corporate
action and obtained all consents necessary for it:
(a) to execute the Finance Documents to which the Borrower and/or the relevant Security Party is a party; and
(b) in the case of the Borrower, to make all the payments contemplated by, and to comply with, the Finance
Documents to which it is a party.
10.5 Consents in force. All the consents referred to in Clause 10.4 (Corporate power) above remain in force and nothing
has occurred which makes any of them liable to revocation.
10.6 Legal validity; effective Security Interests. The Finance Documents to which the Borrower or a Security Party is a
party, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as
provided for in the Finance Documents):
(a) constitute that Borrower’s or that Security Party’s legal, valid and binding obligations enforceable against that
Borrower or that Security Party in accordance with their respective terms; and
(b) create legal, valid and binding Security Interests enforceable in accordance with their respective terms over all
the assets to which they, by their terms, relate;
subject to any relevant insolvency laws affecting creditors’ rights generally.
10.7 No third party Security Interests. Without limiting the generality of Clause 10.6 (Legal validity; effective Security
Interests), at the time of the execution and delivery of each Finance Document:
(a) the Borrower or the relevant Security Party which is party to that Finance Document will have the right to create
all the Security Interests which that Finance Document purports to create; and
(b) no third party will have any Security Interest (except for Permitted Security Interests) or any other interest,
right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates.
10.8 No conflicts. The execution by the Borrower and each Security Party of each Finance Document to which it is a party
and (in the case of the Borrower, the Approved Manager and the Third Party Manager) the Management Agreement,
and the borrowing by the Borrower of the Loan and each Security Party’s compliance with each Finance Document to
which it is a party will not involve or lead to a contravention of:
(a) any law or regulation; or
(b) the constitutional documents of the Borrower or any Security Party; or
(c) any contractual or other obligation or restriction which is binding on the Borrower or any of the assets of the
Borrower and the Security Parties.
10.9 No withholding taxes. All payments which the Borrower or any Security Party is liable to make under the Finance
Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable
under any law of any Pertinent Jurisdiction.
10.10No default. No Event of Default or Potential Event of Default has occurred and is continuing.

34
10.11Information. All information which has been provided in writing by or on behalf of the Borrower or any Security Party
to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5 (Information
provided to be accurate); all audited and unaudited accounts which have been so provided satisfied the requirements
of Clause 11.7 (Form of financial statements); and there has been no material adverse change in the financial position
or state of affairs of the Borrower or any Security Party from that disclosed in the latest of those accounts.
10.12No litigation. No legal or administrative action involving the Borrower or any Security Party (including action relating
to any alleged or actual breach of the ISM Code, the ISPS Code or the MARPOL Protocol) has been commenced or taken
or, to the Borrower’s knowledge, is likely to be commenced or taken which, in either case, would be likely to have a
material adverse effect on that Borrower’s or that Security Party’s financial position or profitability.
10.13Validity and completeness of documents. The Management Agreement constitutes valid, binding and enforceable
obligations of the relevant Owner, the Borrower, the Approved Manager and the Third Party Manager in accordance
with its terms and:
(a) the copy of the Management Agreement and the SPA delivered to the Agent before the date of this Agreement
is a true and complete copy; and
(b) no amendments or additions to the Management Agreement or the SPA have been agreed nor has the relevant
Owner, the Borrower, the Approved Manager or the Third Party Manager waived any of their respective rights
under the Management Agreement.
10.14Compliance with certain undertakings. At the date of this Agreement, the Borrower and each of the Security
Parties are in compliance with Clauses 11.2 (Title; negative pledge), 11.4 (No other liabilities or obligations to be
incurred), 11.5 (Information provided to be accurate), 11.9 (Consents), 11.13 (Principal place of business), 11.14
(Confirmation of no default) and 11.15 (Notification of Default).
10.15Taxes paid. The Borrower and each Security Party have paid all taxes applicable to, or imposed on or in relation to
that Borrower, that Security Party, its business or the Ships.
10.16Compliance. All requirements of the ISM Code, the ISPS Code and the MARPOL Protocol as they relate to the
Borrower, the Approved Manager, the Third Party Manager and each other Security Party and the Ships have been
complied with.
10.17No money laundering. Without prejudice to the generality of Clause 2.3 (Purpose of Loan), in relation to the
borrowing by the Borrower of the Loan, the performance and discharge of its obligations and liabilities under the
Finance Documents, and the transactions and other arrangements effected or contemplated by the Finance Documents
to which the Borrower is a party, the Borrower confirms (i) that it is acting for its own account, (ii) that it will use the
proceeds of the Loan for its own benefit, under its full responsibility and exclusively for the purposes specified in this
Agreement and (iii) that the foregoing will not involve or lead to contravention of any law, official requirement or other
regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of the Directive
2015/849/EC of the Council of the European Communities).
10.18No immunity. No Borrower or Security Party benefits from any immunity from suit.
10.19Disclosure of material facts. The Borrower is not aware of any material facts or circumstances which have not
already been disclosed to the Agent and which might, if disclosed to the Agent, adversely affect the decision of the
Lenders to make the Loan available to the Borrower.
10.20Pari Passu. The obligations of the Borrower under the Finance Documents to which it is a party rank at least pari
passu with all other unsecured indebtedness of the Borrower, other than indebtedness mandatorily preferred by law.

35
10.21Governing law and enforcement. The choice of law as the governing law of any Finance Document will be
recognised and enforced in the jurisdiction of incorporation of the Borrower and each relevant Security Party, and any
judgment obtained in England in relation to any such Finance Document will be recognised and enforced in the
jurisdiction of incorporation of the Borrower and each relevant Security Party.
10.22No filing or stamp tax. Under the laws of all Pertinent Jurisdiction relating to the Borrower and each relevant
Security Party it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other
authority in that jurisdiction (save for the Mortgages which are to be recorded in accordance with the requirements of
the relevant Approved Flag State registry) or that any stamp, registration or similar tax be paid on or in relation the
Finance Documents or the transactions contemplated by the Finance Documents.
10.23Sanctions. No Security Party nor other Group Member nor any director, officer, agent, employee of any Security Party
or other Group Member or any person acting on behalf of any Security Party or other Group Member, is a Restricted
Person nor acts directly or indirectly on behalf of a Restricted Person.
10.24Repetition. Each representation and warranty in this Clause 10 (Representations and Warranties) (other than this
Clause 10.24) is deemed to be repeated by the Borrower by reference to the facts and circumstances then existing on
each date during the Security Period.
11 GENERAL UNDERTAKINGS
11.1 General. The Borrower undertakes with each Creditor Party to comply and shall procure that each Guarantor shall also
comply (as applicable), with the following provisions of this Clause 11 at all times during the Security Period, except
as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.
11.2 Title; negative pledge. The Borrower shall procure that each Guarantor will:
(a) hold the legal title to and the entire beneficial interest in the Ship owned by it, such Ship’s Insurances and
Earnings, free from all Security Interests and other interests and rights of every kind, except for those created
by the Finance Documents and the effect of assignments contained in the Finance Documents and except for
Permitted Security Interests;
(b) not create or permit to arise any Security Interest (except for Permitted Security Interests) over any asset
which is the subject matter of a Finance Document or over any of its shares;
(c) not create or permit to arise, any Security Interest (except for Permitted Security Interests) over any other
asset, present or future; and
(d) procure that its liabilities under the Finance Documents to which it is a party do and will rank at least pari
passu with all its other present and future unsecured liabilities, except for liabilities which are mandatorily
preferred by law.
11.3 No disposal of assets. The Borrower shall procure that no Guarantor shall transfer, lease or otherwise dispose of:
(a) all or a substantial part of its respective assets, whether by one transaction or a number of transactions,
whether related or not; or

36
 (b) any debt payable to it or any other right (present, future or contingent right) to receive a payment, including
any right to damages or compensation,
but paragraph (a) does not apply to any charter of a Ship to which Clause 14.3 (Repair and classification)
applies.
11.4 No other liabilities or obligations to be incurred. The Borrower shall procure that no Guarantor shall incur any
liability or obligation except liabilities and obligations:
(a) under the Finance Documents to which it is a party;
(b) reasonably incurred in the ordinary course of the Borrower’s business of owning, operating, managing and/or
chartering of ships and other ship-related business; and
(c) incurred in relation to or in connection with, the financing of ships owned or to be acquired by, members of the
Group.
11.5 Information provided to be accurate. All financial and other information which is provided in writing by or on
behalf of the Borrower under or in connection with any Finance Document will be true and not misleading and will not
omit any material fact or consideration.
11.6 Provision of financial statements. The Borrower will provide the Agent or shall procure that the Agent is provided
with:
(a) as soon as possible, but in no event later than 180 days after the end of each of its Financial Years, annual
audited (prepared in accordance with US GAAP by a firm of accountants acceptable to the Agent) consolidated
balance sheet and profit and loss accounts of the Borrower (commencing with the Financial Year ending
31 December 2019), together with updated details (in a form acceptable to the Agent) of all off-balance sheet
and time-charter hire commitments of each of the Ships and any other ship from time to time (whether before
or after the date of this Agreement) owned, managed or crewed by, or chartered to, any Group Member;
(b) as soon as possible, but in no event later than 90 days after the end of each three month accounting period,
commencing with the first financial quarter ending 31 March 2020, the Borrower’s unaudited consolidated
balance sheet and profit and loss accounts for that 3 month period certified as to their correctness by its chief
financial officer; and
(c) such further financial information about the Borrower, the Guarantors, the Ships (including, but not limited to,
present and future revenues, charter arrangements, Financial Indebtedness, employment details, operating
expenses and projected capital expenditure) as the Agent may require.
11.7 Form of financial statements. All accounts (audited and unaudited) delivered under Clause 11.6 (Provision of
financial statements) above will:
(a) be prepared in accordance with all applicable laws and US GAAP;
(b) fairly represent the state of affairs of the Group at the date of those financial statements and of its profit for the
period to which those financial statements relate; and
(c) fully disclose or provide for all significant liabilities of the Group.

37
11.8 Shareholder notices. The Borrower will send to the Agent, at the same time as they are despatched, copies of all
communications which are despatched to the Borrower’s shareholders or any class of them related to matters which
could be considered material in the context of this Agreement and the other Finance Documents, unless publicly
announced or filed with a securities exchange.
11.9 Consents. The Borrower will, and shall procure that each Security Party will, maintain in force and promptly obtain or
renew, and will promptly send certified copies to the Agent of, all consents required:
(a) for the Borrower and each Security Party to perform its obligations under any Finance Document to which it is a
party;
(b) for the Approved Manager to perform its obligations under the Management Agreement;
(c) for the validity or enforceability of any Finance Document to which it is a party;
(d) for the Shareholder, with effect from the Actual Transfer Date relating to the shares in respect of each
Guarantor, to acquire, register in its name and own the shares in the Guarantor to be owned by it under the
terms of the SPA; and
(e) for the Borrower and the Approved Manager each to perform its obligations under the Management Agreement,
and the Borrower will, and shall procure that the Security Parties shall, comply with the terms of all such consents.
11.10Maintenance of Security Interests. The Borrower will:
(a) at its own cost, do all that it reasonably can to ensure that each Finance Document validly creates the
obligations and the Security Interests which it purports to create; and
(b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any
Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or
similar tax in all Pertinent Jurisdictions in respect of any Finance Document and give any notice or take any
other step which to the best of its knowledge is or has become, or which, in the opinion of the Majority Lenders,
is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in
evidence or to ensure or protect the priority of any Security Interest which any Finance Document creates.
11.11Notification of litigation. The Borrower will provide the Agent with details of any legal or administrative action
involving the Borrower, the Approved Manager and any other Security Party (to the best of its knowledge), the SPA,
any Ship, the Management Agreement, the Earnings or the Insurances as soon as such action is instituted or it
becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative
action cannot be considered material in the context of any Finance Document.
11.12Amendments to Management Agreement. The Borrower will ensure that neither the relevant Owner nor the
Borrower or the Approved Manager or the Third Party Manager will, without the prior written consent of the Agent
acting on the instructions of the Majority Lenders (such consent not to be unreasonably withheld), agree to any
material amendment or supplement to, or waive any breach in relation to, the Management Agreement.
11.13Principal place of business. The Borrower will maintain its place of business, and keep its corporate documents
and records at the address stated in the definitions to this Agreement; and it will not establish, or do anything as a
result of which it would be deemed to have, a place of business in any country other than the Republic of Marshall
Islands.

38
11.14Confirmation of no default. The Borrower will, within 2 Business Days after service by the Agent of a written
request, serve on the Agent a notice which is signed by a duly authorised director of the Borrower and which states
that no Event of Default or Potential Event of Default has occurred.
The Agent may serve requests under this Clause 11.14 from time to time but only if asked to do so by a Lender or
Lenders having Commitments exceeding 10 per cent of the Total Commitments; and this Clause 11.14 does not affect
the Borrower’s obligations under Clause 11.15 (Notification of default).
11.15Notification of default. The Borrower will notify the Agent as soon as it becomes aware of the occurrence of an
Event of Default or a Potential Event of Default and will keep the Agent fully up-to-date with all developments.
11.16Provision of further information. The Borrower will, as soon as practicable after receiving the request, provide the
Agent with any additional financial or other information relating:
(a) to it, the Security Parties, the Ships, the Earnings or the Insurances; or
(b) to any other matter relevant to, or to any provision of, a Finance Document or a Management Agreement;
which may be requested by the Agent, the Security Trustee or any Lender at any time.
11.17Provision of copies and translation of documents. The Borrower will supply the Agent with a sufficient number
of copies of the documents referred to above to provide a copy for each Creditor Party and, if the Agent so requires in
respect of any of those documents, it will provide a certified English translation prepared by a translator approved by
the Agent.
11.18Sanctions. Promptly upon becoming aware of them, provide to the Agent the details of any inquiry, claim, action,
suit, proceeding or investigation pursuant to Sanctions by any Sanctions Authority against a Security Party, any of the
direct or indirect owners of a Security Party, any Affiliate of a Security Party, any of their joint ventures or any of their
respective directors, officers, employees, agents or representatives, as well as information on what steps are being
taken with regards to answer or oppose the same.
11.19Money laundering. Promptly upon the Agent’s request, the Borrower will supply, or procure the supply of, such
documentation and other evidence as is reasonably requested by the Agent in order for each Creditor Party to carry
out and be satisfied with the results of all necessary “know your client” or other checks which it is required to carry
out in relation to the transactions contemplated by the Finance Documents and to the identity of any parties to the
Finance Documents (other than Creditor Parties) and their directors and officers.
11.20“Know your customer” checks. If:
(a) the introduction of or any change in (or in the interpretation, administration or application of) any law or
regulation made after the date of this Agreement;
(b) any change in the status of the Borrower or any Security Party after the date of this Agreement; or
(c) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement; or

39
 (d) any anti-money laundering or anti-terrorism financing laws and regulations applicable to the Agent or any
Lender
obliges the Agent or any Lender (or, in the case of paragraph (c), any prospective new Lender) to comply with “know
your customer” or similar identification procedures in circumstances where the necessary information is not already
available to it, the Borrower shall promptly upon the request of the Agent or the Lender concerned supply, or procure
the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf
of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (c), on behalf of
any new prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in
paragraph (c), any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your
customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated
in the Finance Documents.
11.21Class records
The Borrower shall arrange for the Agent to have access electronically to the class records of each Ship by either
(i) arranging for the relevant classification society to give the Agent direct access to such class records or
(ii) designating the Agent as a user or administrator of the Borrower’s electronic accounts with the relevant
classification society.
11.22Insurance opinion
The Borrower shall provide the Agent on request, at the Borrower’s cost, with an opinion from insurance consultants on
the insurances effected or to be effected in respect of each Ship, confirming that each Ship is insured on terms
approved by the Agent or, if such insurance opinion has been obtained by the Agent, shall reimburse the Agent for the
cost of such opinion.
11.23Sanctions
The Borrower shall:
(a) not be, and shall procure that each other Group Member and each Affiliate of any of them and any director,
officer, agent, employee or person acting on behalf of the foregoing is not, a Restricted Person and does not act
directly or indirectly on behalf of a Restricted Person;
(b) not, and shall procure that no other Group Member or any Affiliate of any of them shall, use any revenue or
benefit derived from any activity or dealing with a Restricted Person in discharging any obligation due or owing
to the Creditor Parties;
(c) procure that no proceeds from any activity or dealing with a Restricted Person are credited to any bank account
held with any Creditor Party in its name or in the name of any other member of the Group or any Affiliate of
any of them;
(d) and shall procure that each other Group Member and any Affiliate of any of them will, to the extent permitted
by law, promptly upon becoming aware of them, supply to the Creditor Parties details of any claim, action, suit,
proceedings or investigation against it with respect to Sanctions by any Sanctions Authority; and
(e) not, and shall procure that no other member of the Group or any Affiliate of any of them will, directly or
indirectly, make available any proceeds of the Loan to fund or facilitate trade, business or other activities
(i) involving or for the benefit of any Restricted Person or (ii) in any other manner that could result in either
Borrower or a Creditor Party being in breach of any Sanctions or becoming a Restricted Person, or permit or
authorise any other person to do either of (i) or (ii) above.

40
11.24Anti-bribery
The Borrower shall ensure that neither they nor any of their respective Affiliates, officers, directors, employees or
agents acting on its behalf will offer, give, insist on, receive or solicit any illegal payment or improper advantage to
influence the action of any person in connection with any of its business.
11.25Money Laundering
The Borrower shall:
(a) provide the Agent with information, certificates and any documents required by the Agent to ensure
compliance with any law, official requirement or other regulatory measure or procedure implemented to
combat money laundering; and
(b) notify the Agent as soon as it becomes aware of any matters evidencing that a breach of any law, official
requirement or other regulatory measure or procedure implemented to combat money laundering may or is
about to occur or that the person(s) who have or will receive the commercial benefit of this Agreement have
changed after the date of this Agreement.
12 CORPORATE UNDERTAKINGS
12.1 General. The Borrower also undertakes with each Creditor Party to comply and shall procure that each Guarantor will
also comply (as applicable) with the following provisions of this Clause 12 at all times during the Security Period
except as the Agent may, with the authorisation of the Majority Lenders, otherwise consent.
12.2 Maintenance of status. The Borrower will maintain and shall procure that each Guarantor will also maintain its
separate corporate existence under the laws of the Republic of Marshall Islands.
12.3 Negative undertakings. The Borrower shall procure that no Guarantor will, and in respect of (b) to (d) below, the
Borrower will not:
(a) carry on any business other than the owning, operating, managing and/or chartering of ships and other ship-
related business;
(b) pay any dividend or make any other form of distribution or effect any form of redemption, purchase or return of
share capital unless:
(i) the Borrower is not in breach of any of their respective obligations under this Agreement and the other
Finance Documents and no Event of Default or Potential Event of Default has occurred; and
(ii) the Borrower is in compliance with Clause 12.4 and will, following any such payment of dividend or other
form of distribution or redemption, purchase or return of share capital, be in compliance with Clause
12.4;
(c) provide any form of credit or financial assistance to:
(i) a person who is directly or indirectly interested in the Borrower’s share or loan capital; or
(ii) any company in or with which such a person is directly or indirectly interested or connected;

41
 or enter into any transaction with or involving such a person or company on terms which are, in any respect,
less favourable to the Borrower than those which it could obtain in a bargain made at arms’ length;
(d) without the prior written consent of the Agent, acting on the instructions of the Majority Lenders (such consent
not to be unreasonably withheld), enter into any form of amalgamation, merger or de-merger, name change or
any form of reconstruction or reorganisation, which would (in the case of the Borrower) give rise to a Change of
Control Event; and
(e) in relation to the Earnings of the Ship owned by it, open or maintain any account with any bank or financial
institution except accounts with the Account Bank, the Agent or the Security Trustee for the purposes of the
Finance Documents.
12.4 Financial covenants of the Borrower. At all times during the Security Period, by reference to the Latest Accounts,
the Borrower ensure that:
(a) at no time shall the Liquidity of the Group be less than $500,000 multiplied by the number of vessels owned by
any member of the Group;
(b) the Net Debt divided by the Total Assets (adjusted for market values of vessels calculated in accordance with
Clause 15.3 (Valuation of Ship)) less cash (which shall have the meaning given thereto under US GAAP meaning
both restricted and freely available cash) shall be at all times less than 75%;
(c) the ratio of EBITDA to Interest Expense shall at all times be at least 2 to 1; and
(d) the Net Worth shall at all times be equal to or more than USD135,000,000.
12.5 Compliance Check. Compliance with the undertakings contained in Clause 12.4 (Financial covenants) shall be
determined by reference to (i) the unaudited consolidated accounts for each consecutive quarter period in each
Financial Year of the Borrower and commencing with the first financial quarter of ending 31 March, 2020 and (ii) the
audited consolidated accounts for each Financial Year of the Borrower and commencing with the Financial Year ending
31 December 2019, each delivered to the Agent pursuant to Clause 11.6 (Provision of financial statements) of this
Agreement. Unless and until the Agent (acting with the authorisation of the Majority Lenders) otherwise agrees in
writing, at the same time as it delivers those consolidated accounts (audited and unaudited) for each consecutive
quarter and Financial Year, the Borrower shall deliver to the Agent a Compliance Certificate, signed by the chief
financial officer of the Borrower, evidencing calculations and compliance with the financial covenants.
12.6 Change in accounting expressions and policies. If, by reason of change in format or US GAAP or other relevant
accounting policies, the expressions appearing in any accounts and financial statements referred to in Clause 11.6
(Provision of financial statements) alter from those in the accounts and financial statements for the Group for the
Financial Year ended 31 December 2019, the relevant definitions contained in Clause 1.1 (Definitions) and the
provisions of Clause 12.4 (Financial covenants) shall be deemed modified in such manner as the Agent, acting with the
authorisation of the Majority Lenders, shall require to take account of such different expressions but otherwise to
maintain in all respects the substance of those provisions.
12.7 Minimum Liquidity. The Borrower shall ensure and procure that the Guarantors ensure, that the aggregate balance
standing to the credit of the Earnings Accounts shall at all times be no less than $3,750,000.

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13 INSURANCE
13.1 General. The Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause
13, and ensure that the Guarantors comply with the same, at all times until the last day of the Security Period except
as the Agent may, with the authority of the Majority Lenders, otherwise permit.
13.2 Maintenance of obligatory insurances. The Borrower shall procure that each Guarantor shall ensure that the Ship
owned by it is insured at its expense against:
(a) fire and such other risks as are usually contained within a standard marine insurance policy and/or increased
value and disbursements policy covering the hull and machinery of such Ship;
(b) war risks;
(c) protection and indemnity risks; and
(d) any other risks against which the Security Trustee considers, having regard to practices and other
circumstances prevailing at the relevant time, it would in the opinion of the Security Trustee be reasonable for
the Guarantor to insure and which are specified by the Security Trustee by notice to the Borrower and the
relevant Guarantor.
13.3 Terms of obligatory insurances. The Borrower shall procure that each Guarantor shall effect such insurances in
respect of its Ship:
(a) in Dollars and/or such currencies as agreed with the Security Trustee;
(b) in the case as specified in Clause 13.2 (Maintenance of obligatory insurances), cover is to be on an agreed
value basis in an amount at least the greater of (i) such amount as when added to the insured value of the
other Ships is 120 per cent. of the Loan and (ii) the Fair Market Value of that Ship;
(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time
to time available under a standard protection and indemnity entry with an international group protection and
indemnity club (currently $1,000,000,000 in relation to any one event);
(d) in relation to protection and indemnity risks in respect of each Ship’s gross tonnage;
(e) on approved terms; and
(f) through approved brokers and with approved insurance companies and/or underwriters or, in the case of war
risks and protection and indemnity risks, in approved war risks and protection and indemnity risks
associations.
13.4 Further protections for the Creditor Parties. In addition to the terms set out in Clause 13.3 (Terms of obligatory
insurances), the Borrower shall procure that the obligatory insurances shall:
(a) whenever the Security Trustee requires, name (or be amended to name) the Security Trustee as an additional
named assured for its rights and interests, warranted no operational interest and with full waiver of rights of
subrogation against the Security Trustee, but without the Security Trustee thereby being liable to pay (but
having the right to pay) premiums, calls or other assessments in respect of such insurance;
(b) name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify;

43
 (c) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee
shall be made without set-off, counterclaim or deductions or condition whatsoever;
(d) provide that such obligatory insurances shall be primary without right of contribution from other insurances
which may be carried by the Security Trustee or any other Creditor Party; and
(e) provide that the Security Trustee may make proof of loss if the Borrower or the Guarantor fails to do so.
13.5 Renewal of obligatory insurances. The Borrower shall procure that each Guarantor shall:
(a) before the expiry of any obligatory insurance effected by it:
(i) notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war
risks association through or with whom that Security Party proposes to renew that obligatory insurance
and of the proposed terms of renewal; and
(ii) obtain the Security Trustee’s approval to the matters referred to in paragraph (i);
(b) as soon as practicable but in any event before the expiry of any obligatory insurance effected by it, renew that
obligatory insurance in accordance with the Security Trustee’s approval pursuant to paragraph (a); and
(c) procure that the approved brokers and/or the war risks and protection and indemnity associations with which
such a renewal is effected shall promptly after the renewal notify the Security Trustee in writing of the terms
and conditions of the renewal.
13.6 Copies of policies; letters of undertaking. The Borrower shall procure that each Guarantor shall ensure that all
approved brokers provide the Security Trustee as soon as practicable with pro forma copies of all policies relating to
the obligatory insurances which have been effected or renewed and of a letter or letters or undertaking in a form
required by the Security Trustee and that:
(a) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of
assignment complying with the provisions of Clause 13.4 (Further protections for the Creditor Parties);
(b) they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in
accordance with the said loss payable clause;
(c) they will advise the Security Trustee immediately of any material change to the terms of the obligatory
insurances;
(d) they will notify the Security Trustee, before the expiry of the obligatory insurances, in the event of their not
having received notice of renewal instructions from the relevant Guarantor or its agents and, in the event of
their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the
instructions; and
(e) they will not set off against any sum recoverable in respect of a claim relating to the Ship owned by the
relevant Guarantor under such obligatory insurances any premiums or other amounts due to them or any other
person whether in respect of any of the Ships or otherwise, they waive any lien on the policies, or any sums
received under them, which they might have in respect of such premiums or other amounts, and they will not
cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will
arrange for a separate policy to be issued in respect of the Ships forthwith upon being so requested by the
Security Trustee.

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13.7 Copies of certificates of entry. The Borrower shall procure that each Guarantor shall ensure that for any protection
and indemnity and/or war risks associations in which a Ship is entered the Security Trustee will be provided with:
(a) a certified copy of the certificate of entry for that Ship;
(b) a letter or letters of undertaking in such form as may be required by the Security Trustee;
(c) where required to be issued under the terms of insurance/indemnity provided by the relevant Guarantor’s
protection and indemnity association, a certified copy of each United States of America voyage quarterly
declaration (or similar document or documents) made by the relevant Guarantor in relation to the Ship owned
by it in accordance with the requirements of such protection and indemnity association; and
(d) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally
Sensitive Material issued by the relevant certifying authority in relation to the relevant Ship.
13.8 Deposit of original policies. The Borrower shall procure that each Guarantor shall ensure that all policies issued and
relating to obligatory insurances are deposited by the relevant Guarantor with the approved intermediaries or other
approved parties through which the insurances are effected or renewed.
13.9 Payment of premiums. The Borrower shall procure that each Guarantor shall punctually pay all premiums or other
sums payable in respect of the obligatory insurances terms and conditions, and produce all relevant receipts when so
required by the Security Trustee.
13.10Guarantees. The Borrower shall procure that each Guarantor shall ensure that any guarantees required by a
protection and indemnity or war risks association are promptly issued and remain in full force and effect.
13.11Compliance with terms of insurances. The Borrower shall procure that each Guarantor shall not do or omit to do
(or permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid,
void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in
part; and, in particular:
(a) the relevant Guarantor shall take all necessary action and comply with all requirements which may from time
to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause
13.6(c) (Copies of policies; letters of undertaking)) ensure that the obligatory insurances are not made subject
to any exclusions or qualifications to which the Security Trustee has not given its prior approval;
(b) a Guarantor shall not make any changes relating to the classification or classification society or manager or
operator of the Ship owned by it approved by the underwriters of the obligatory insurances;
(c) the relevant Guarantor shall, make (and promptly supply copies to the Agent of) all quarterly or other voyage
declarations which may be required by the protection and indemnity risks association in which its Ship is
entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined
in the United States Oil Pollution Act 1990 or any other applicable legislation); and
(d) a Guarantor shall not employ its Ship, nor allow such Ship to be employed, otherwise than in conformity with
the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and
complying with any requirements (as to extra premium or otherwise) which the insurers specify.

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13.12Alteration to terms of insurances. The Borrower shall procure that each Guarantor shall not make or agree to any
alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance.
13.13Settlement of claims. The Borrower shall procure that no Guarantor shall settle, compromise or abandon any claim
under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all
documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any
time become payable in respect of the obligatory insurances.
13.14Provision of copies of communications. The Borrower shall and shall procure that each Guarantor shall, promptly
upon request by the Agent provide the Security Trustee, copies of all written communications which are material in the
context of the Borrower’s and the Guarantor’s ’s obligations under the Finance Documents between it and:
(a) the approved brokers or insurers; and
(b) the approved protection and indemnity and/or war risks associations; and
(c) the approved insurance companies and/or underwriters, which relate directly or indirectly to:
(i) the relevant Guarantor’s obligations relating to the obligatory insurances including, without limitation, all
requisite declarations and payments of additional premiums or calls; and
(ii) any credit arrangements made between the relevant Guarantor and any of the persons referred to in
paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory
insurances.
13.15Provision of information. In addition, the Borrower shall and shall procure that each Guarantor shall, promptly
provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee
(or any such designated person) requests for the purpose of:
(a) obtaining or preparing any report from an independent marine insurance broker or consultant as to the
adequacy of the obligatory insurances effected or proposed to be effected; and/or
(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 13.16 (Mortgagee’s interest
insurance) or dealing with or considering any matters relating to any such insurances;
and the Borrower shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other
expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in
paragraph (a) above.
13.16Mortgagee’s interest insurance. The Security Trustee (acting on behalf of all the Lenders) shall be entitled, at the
Borrower’s cost, from time to time to effect, maintain and renew a mortgagee’s interest and pollution risks insurance
policy (including additional perils (pollution) cover) in an amount equal to at least 120% of the Loan such terms,
through such insurers and generally in such manner as the Security Trustee may from time to time consider
appropriate.

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13.17Review of insurance requirements. The Majority Lenders shall be entitled to review the requirements of this
Clause 13 (Insurance) from time to time in order to take account of any changes in circumstances after the date of this
Agreement which are, in the opinion of the Majority Lenders, significant and capable of affecting the Borrower or an
Owner or any Ship and its or their insurance (including, without limitation, changes in the availability or the cost of
insurance coverage or the risks to which an Owner may be subject), and may appoint insurance consultants in relation
to this review at the cost of the Borrower.
13.18Modification of insurance requirements. The Security Trustee shall notify the Borrower and the relevant Owner of
any proposed modification under Clause 13.17 (Review of insurance requirements) to the requirements of this Clause
13 which the Majority Lenders reasonably consider appropriate in the circumstances, and such modification shall take
effect on and from the date it is notified in writing to the Borrower as an amendment to this Clause 13 and shall bind
the Borrower and the relevant Owner accordingly.
13.19Compliance with mortgagee’s instructions. The Security Trustee shall be entitled (without prejudice to or
limitation of any other rights which it may have or acquire under any Finance Document) to require a Ship to remain at
any safe port or to proceed to and remain at any safe port designated by the Security Trustee until the relevant
Guarantor implements any amendments to the terms of the obligatory insurances and any operational changes
required as a result of a notice served under Clause 13.18 (Modification of insurance requirements).
13.20Assured and Co-Assured. If persons other than the relevant Guarantor and/or Security Trustee are named as
assureds or co-assureds in the insurance policy of the relevant Ship, the Borrower shall procure that these persons
assign their insurances to the Security Trustee upon such terms and conditions as the Security Trustee may require.
14 SHIP’S COVENANTS
14.1 General. The Borrower also undertakes with each Creditor Party to procure that each Guarantor comply in relation to
its Ship, with, the following provisions of this Clause 14 at all times until the last day of the Security Period except as
the Agent, with the authority of the Majority Lenders, may otherwise permit (such permission not to be unreasonably
withheld in the case of Clause 14.13(b) (Restriction on chartering, appointment of managers etc.).
14.2 Ship’s name and registration. The Borrower shall procure that each Guarantor shall keep the Ship owned by it
registered in its name under an Approved Flag free of any Security Interest other than a Permitted Security Interest;
and shall not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or
imperilled; and shall not, without the prior written consent of the Security Trustee change the name or port of registry
of the Ship owned by it.
14.3 Repair and classification. The Borrower shall procure that each Guarantor shall keep the Ship owned by it in a good
and safe condition and state of repair:
(a) consistent with first-class ship ownership and management practice;
(b) so as to maintain that Ship’s class with Lloyds Register of Shipping or Germanischer Lloyd AG (or such other
first-class classification society which is a member of IACS acceptable to the Agent, such acceptance not to be
unreasonably withheld or delayed) free of overdue recommendations and conditions affecting that Ship’s class
that have not been complied with in accordance with their terms; and

47
 (c) so as to comply with all laws and regulations applicable to vessels registered at ports in the relevant Approved
Flag State or to vessels trading to any jurisdiction to which that Ship may trade from time to time, including but
not limited to the ISM Code, the ISPS Code and the MARPOL Protocol.
14.4 Classification society undertaking. The Borrower shall procure that each Guarantor shall instruct the classification
society referred to in Clause 14.3(b) (Repair and classification) (and procure that the classification society undertakes
with the Security Trustee):
(a) to send to the Security Trustee, following receipt of a written request from the Security Trustee, certified true
copies of all original class records held by the classification society in relation to the Ship owned by the
relevant Guarantor;
(b) to allow the Security Trustee (or its agents), at any time and from time to time, to inspect the original class and
related records of that Guarantor and its Ship at the offices of the classification society and to take copies of
them;
(c) to notify the Security Trustee immediately in writing if the classification society:
(i) receives notification from the relevant Guarantor or any person that the Ship’s classification society is to
be changed; or
(ii) becomes aware of any facts or matters which may result in or have resulted in a change, suspension,
discontinuance, withdrawal or expiry of the Ship’s class under the rules or terms and conditions of the
relevant Guarantor’s or its Ship’s membership of the classification society;
(d) following receipt of a written request from the Security Trustee:
(i) to confirm that the relevant Guarantor is not in default of any of its contractual obligations or liabilities to
the classification society and, without limiting the foregoing, that it has paid in full all fees or other
charges due and payable to the classification society; or
(ii) if the relevant Guarantor is in default of any of its contractual obligations or liabilities to the
classification society, to specify to the Security Trustee in reasonable detail the facts and circumstances
of such default, the consequences thereof, and any remedy period agreed or allowed by the classification
society.
14.5 Modification. The Borrower shall procure that no Guarantor shall make any modification or repairs to, or replacement
of, the Ship owned by it or equipment installed on its Ship which would or might materially alter the structure, type or
performance characteristics of that Ship or materially reduce its value.
14.6 Removal of parts. The Borrower shall procure that no Guarantor shall remove any material part of the Ship owned by
it, or any item of equipment installed on, the Ship unless the part or item so removed is forthwith replaced by a
suitable part or item which is in the same condition as or better condition than the part or item removed, is free from
any Security Interest or any right in favour of any person other than the Security Trustee and becomes on installation
on the Ship the property of that Guarantor and subject to the security constituted by the Mortgage, relative to the Ship
Provided that a Guarantor may install equipment owned by a third party if the equipment can be removed without
any material risk of damage to the Ship.
14.7 Surveys. The Borrower shall procure that each Guarantor shall submit the Ship owned by it regularly to all periodical
or other surveys which may be required for classification purposes and, if so required by the Security Trustee, provide
the Security Trustee, with copies of all survey reports.

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14.8 Inspection. The Borrower shall procure that each Guarantor shall permit and facilitate the Security Trustee (by
surveyors or other persons appointed by it for that purpose) to board the Ship owned by it at all reasonable times to
inspect its condition or to satisfy themselves about proposed or executed repairs (at the Borrower’s or the relevant
Guarantor’s cost) and shall afford all proper facilities for such inspections, at the cost of the Borrower or the Guarantor
for one such inspection per Ship in each calendar year and otherwise at the Agent’s cost.
14.9 Prevention of and release from arrest. The Borrower shall procure that each Guarantor shall promptly discharge:
(a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against its
Ship, its Earnings or its Insurances;
(b) all taxes, dues and other amounts charged in respect of its Ship, its Earnings or its Insurances; and
(c) all other outgoings whatsoever in respect of its Ship, the Earnings or the Insurances;
and, forthwith upon receiving notice of the arrest of a Ship, or of its detention in exercise or purported exercise of any
lien or claim, the Borrower shall procure that the relevant Guarantor shall procure its release by providing bail or
otherwise as the circumstances may require.
14.10Compliance with laws etc. The Borrower shall procure that each Guarantor shall:
(a) comply, or procure compliance with the ISM Code, the ISPS code, the MARPOL Protocol and Environmental Laws
and all other laws or regulations relating to the Ship owned by it, its ownership, operation and management or
to the business that Guarantor;
(b) comply, and will use best endeavours to procure that each Security Party and each other Group Member will,
comply in all respect with all Sanctions;
(c) not employ the Ship owned by it nor allow its employment in any manner contrary to any law or regulation in
any relevant jurisdiction including but not limited to the ISM Code, the ISPS code and the MARPOL Protocol; and
(d) in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit its Ship
to enter or trade to any zone which is declared a war zone by any government or by its Ship’s war risks insurers
unless the prior written consent of the Security Trustee has been given and the relevant Guarantor has (at its
expense) effected any special, additional or modified insurance cover which the Security Trustee may require.
14.11Provision of information. The Borrower shall procure that each Guarantor shall promptly provide the Security
Trustee with any information which it requests regarding:
(a) the Ship owned by it, its employment, position and engagements;
(b) the Earnings and payments and amounts due to its Ship’s master and crew;
(c) any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of its
Ship and any payments made in respect of that Ship;
(d) any towages and salvages;

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 (e) that Guarantor’s, the Approved Manager’s, the Third Party Manager’s (if applicable) or its Ship’s compliance
with the ISM Code, the ISPS Code and the MARPOL Protocol;
and, upon the Security Trustee’s request, provide copies of any current charter relating to any Ship, of any current
charter guarantee and copies of the relevant Guarantor’s or the Approved Manager’s or the Third Party’s Manager
Document of Compliance.
14.12Notification of certain events. The Borrower shall procure that each Guarantor shall immediately notify the
Security Trustee by fax, confirmed forthwith by letter, of:
(a) any casualty which is or is likely to be or to become a Major Casualty;
(b) any occurrence as a result of which the Ship has become or is, by the passing of time or otherwise, likely to
become a Total Loss;
(c) any requirement or recommendation made by any insurer or classification society or by any competent
authority which is not complied with within the relevant specified time limit or, in the absence of such time
limit, promptly;
(d) any arrest or detention of a Ship, any exercise or purported exercise of any lien on a Ship or its Earnings or any
requisition of that Ship for hire;
(e) any Environmental Claim made against a Guarantor or the Approved Manager or in connection with any Ship or
any Environmental Incident;
(f) any claim for breach of the ISM Code, the ISPS Code or the MARPOL Protocol being made against an Owner or
the Approved Manager or the Third Party Manager or otherwise in connection with any Ship; or
(g) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code,
the ISPS Code or the MARPOL Protocol not being complied with;
and the Borrower shall and shall procure that each Guarantor shall keep the Security Trustee advised in writing on a
regular basis and in such detail as the Security Trustee shall require of the Borrower’s, the relevant Owner’s, the
Approved Manager’s, the Third Party Manager’s or any other person’s response to any of those events or matters.
14.13Restrictions on chartering, appointment of managers etc. The Borrower shall procure that no relevant
Guarantor shall:
(a) let the Ship owned by it on demise charter for any period;
(b) enter into any time or consecutive voyage charter in respect of the Ship owned by it for a term which exceeds,
or which by virtue of any optional extensions may exceed, 12 months;
(c) enter into any charter in relation to its Ship under which more than 2 months’ hire (or the equivalent) is payable
in advance;
(d) charter its Ship otherwise than on bona fide arm’s length terms at the time when that Ship is fixed;

50
 (e) appoint a manager of its Ship other than the entities advised to the Agent at the date of this Agreement as the
Approved Manager or Third Party Manager of each Ship, provided that the Creditor Parties consent to the
change of management of each ship to either entity being the Approved Manager and the Third Party Manager
in respect of each Ship at the date of this Agreement on the condition that such Approved Manager or Third
Party Manager deliver to the Agent, to the Agent’s satisfaction (i) a certified true copy of the Management
Agreement, (ii) a Manager’s Undertaking in the Agreed Form and (iii) in relation to such Approved Manager or
Third Party Manager, items 1, 2, 3, 4, 6, 7, 8 and 9 included in Schedule 3, Part A of this Agreement and items
2(f) and 3(b) included in Schedule 3, Part B of this Agreement;
(f) agree to any alteration to the material terms of the Management Agreement relating to its Ship or to any other
terms of the Approved Manager’s and the Third Party Manager’s appointment;
(g) de-activate or lay up its Ship for more than 30 days; or
(h) put its Ship into the possession of any person for the purpose of work being done upon it in an amount
exceeding or likely to exceed $500,000 (or the equivalent in any other currency), which amount shall exclude
dry-docking costs, unless the Agent (acting with authorisation of the Majority Lenders) has given prior approval
in writing.
14.14Notice of Mortgage. The Borrower shall procure that each Guarantor shall keep the relevant Mortgage registered
against the Ship owned by it as a valid first priority mortgage, carry on board that Ship a certified copy of the relevant
Mortgage and place and maintain in a conspicuous place in the navigation room and the Master’s cabin of that Ship a
framed printed notice stating that that Ship is mortgaged by the relevant Guarantor to the Security Trustee; and
14.15Sharing of Earnings. The Borrower shall not, and shall procure that no Owner shall, enter into any agreement or
arrangement for the sharing of any Earnings other than any time or voyage charters with profit sharing clauses.
14.16ISPS Code. The Borrower shall procure that each Guarantor shall comply with the ISPS Code and in particular, without
limitation, shall:
(a) procure that its Ship and the company responsible for such Ship’s compliance with the ISPS Code comply with
the ISPS Code; and
(b) maintain for its Ship an ISSC; and
(c) notify the Agent immediately in writing of any actual or threatened withdrawal, suspension, cancellation or
modification of the ISSC.
14.17Charters etc. The Borrower shall (i) deliver to the Agent a certified copy of each Extended Employment Contract
upon its execution, (ii) forthwith on the Agent’s request procure that the relevant Guarantor executes (a) a Charter
Assignment in respect thereof and (b) any notice of assignment required in connection therewith and use reasonable
commercial efforts to procure the acknowledgement of any such notice of assignment by the relevant charterer
(provided that any failure to procure the same shall not constitute an Event of Default) and (iii) pay all legal and other
costs incurred by the Agent in connection with any such Charter Assignments forthwith following the Agent’s demand.
14.18Inventory of Hazardous Material. The Borrower shall procure that (if not already in place) immediately following
completion of its next dry-docking but in no event later than the date required by the applicable regulation, each Ship
shall hold at all times during the Facility Period an Inventory of Hazardous Material or equivalent document,
where “Inventory of Hazardous Material” means a statement of compliance issued by the relevant classification
society which includes a list of any and all materials known to be potentially hazardous utilised in the construction of
a Ship also referred to as “List of Hazardous Materials”.

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14.19Sustainable Vessel dismantling. The Borrower confirms that as long as it is in a lending relationship with ABN
AMRO BANK N.V. it will ensure that any Ship controlled by it or sold to an intermediary with the intention of being
scrapped, is recycled at a recycling yard which conducts its recycling business in a socially and environmentally
responsible manner, in accordance with the provisions of The Hong Kong International Convention for the Safe and
Environmentally Sound Recycling of Ships, 2009 and/or the EU Ship Recycling Regulation,
where “EU Ship Recycling Regulation” means Regulation (EU) No 1257/2013 of the European Parliament and of the
Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC
(Text with EEA relevance).
14.20Inspection Reports. The Borrower shall provide to the Agent, upon the Agent’s request from time to time, an
inspection report in respect of each Ship which is subject to a Mortgage, in a form and substance, and from a marine
surveyor, acceptable to the Agent.
15 SECURITY COVER
15.1 Minimum required security cover. Clause 15.2 (Provision of additional security; prepayment) applies if the Agent
notifies the Borrower that:
(a) the aggregate of the Fair Market Values (determined as provided in Clause 15.3 (Valuation of Ship)) of the Ships
subject to a Mortgage; plus
(b) the net realisable value of any additional security previously provided under this Clause 15;
is below 140% of the Loan.
15.2 Provision of additional security; prepayment. If the Agent serves a notice on the Borrower under Clause 15.1
(Minimum required security cover), the Borrower shall, within 1 month after the date on which the Agent’s notice is
served, either:
(a) provide, or ensure that a third party provides, additional security which, in the opinion of the Majority Lenders,
has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may,
with the authorisation of the Majority Lenders, approve or require; or
(b) prepay and/or cancel, in accordance with Clause 8 (Repayment and Prepayment), such part (at least) of the
Loan as will eliminate the shortfall.
15.3 Valuation of Ship. The Fair Market Value of a Ship at any date is that shown as the average of valuations prepared by
two Approved Brokers selected and appointed by the Agent:
(a) as at a date not more than 30 days previously;
(b) with or without physical inspection of that Ship (as the Agent may require); and
(c) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a
willing seller and a willing buyer, free of any existing charter or other contract of employment.

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 Valuations shall be obtained by the Borrower and addressed to the Agent:
(a) prior to (but dated no more than 30 days prior to) the Drawdown Date;
(b) at six-monthly intervals commencing on 31 March 2020; and
(c) (in addition to (a) and (b) above) at any other time as the Agent shall require (in its absolute discretion).
15.4 Value of additional vessel security. The net realisable value of any additional security which is provided under
Clause 15.2 (Provision of additional security; prepayment) and which consists of a Security Interest over a vessel shall
be that shown by a valuation complying with the requirements of Clause 15.3 (Valuation of Ship).
15.5 Valuations binding. Any valuation under Clause 15.2 (Provision of additional security; prepayment), 15.3 (Valuation
of Ship) or 15.4 (Value of additional vessel security) shall be binding and conclusive as regards the Borrower, as shall
be any valuation which the Majority Lenders make of any additional security which does not consist of or include a
Security Interest.
15.6 Provision of information. The Borrower shall promptly provide the Agent and any Approved Broker or expert acting
under Clause 15.3 (Valuation of Ship) or 15.4 (Value of additional vessel security) with any information which the
Agent or the Approved Broker or expert may request for the purposes of the valuation; and, if the Borrower fails to
provide the information by the date specified in the request, the valuation may be made on any basis and
assumptions which the Approved Broker or the Majority Lenders (or the expert appointed by them) consider prudent.
15.7 Payment of valuation expenses. Without prejudice to the generality of the Borrower’s obligations under Clauses 20
(Expenses) and 21 (Indemnities), the Borrower shall, on demand, pay the Agent the amount of the fees and expenses
of any Approved Broker instructed under this Clause 15.
16 PAYMENTS AND CALCULATIONS
16.1 Currency and method of payments. All payments to be made by the Lenders or by the Borrower under a Finance
Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:
(a) by not later than 11.00 a.m. (New York City time) on the due date;
(b) in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such
other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the
time for the settlement of international transactions of the type contemplated by this Agreement);
(c) in the case of an amount payable by a Lender to the Agent or by the Borrower to the Agent or any Lender, to
such account as the Agent may from time to time notify to the Borrower and the other Creditor Parties for this
purpose; and
(d) in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to
the Borrower and the other Creditor Parties.
16.2 Payment on non-Business Day. If any payment by the Borrower or a Security Party under a Finance Document
would otherwise fall due on a day which is not a Business Day:
(a) the due date shall be extended to the next succeeding Business Day; or
(b) if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to
the immediately preceding Business Day;

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 (c) and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due
date.
16.3 Basis for calculation of periodic payments. All interest and commitment fee and guarantee fee and any other
payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and
shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
16.4 Distribution of payments to Creditor Parties. Subject to Clauses 16.5 (Permitted deductions by Agent), 16.6
(Agent only obliged to pay when monies received) and 16.7 (Refund to Agent of monies not received):
(a) any amount received by the Agent under a Finance Document for distribution or remittance to a Creditor Party
shall be made available by the Agent to that Creditor Party by payment, with funds having the same value as
the funds received, to such account as the Creditor Party may have notified to the Agent not less than 3
Business Days previously; and
(b) amounts to be applied in satisfying amounts of a particular category which are due to the Lenders generally
shall be distributed by the Agent to each Lender pro rata to the amount in that category which is due to it.
16.5 Permitted deductions by Agent. Notwithstanding any other provision of this Agreement or any other Finance
Document, the Agent may, before making an amount available to a Lender, deduct and withhold from that amount any
sum which is then due and payable to the Agent from that Lender under any Finance Document or any sum which the
Agent is then entitled under any Finance Document to require that Lender to pay on demand.
16.6 Agent only obliged to pay when monies received. Notwithstanding any other provision of this Agreement or any
other Finance Document, the Agent shall not be obliged to make available to the Borrower, any Lender any sum which
the Agent is expecting to receive for remittance or distribution to that Borrower, to that Lender until the Agent has
satisfied itself that it has received that sum.
16.7 Refund to Agent of monies not received. If and to the extent that the Agent makes available a sum to the
Borrower or a Lender, without first having received that sum, the Borrower or (as the case may be) the Lender
concerned shall, on demand:
(a) refund the sum in full to the Agent; and
(b) pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or
other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving
it.
16.8 Agent may assume receipt. Clause 16.7 (Refund to Agent of monies not received) shall not affect any claim which
the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it
had not received the sum which it made available.
16.9 Creditor Party accounts. Each Creditor Party shall maintain accounts showing the amounts owing to it by the
Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made
by the Borrower and any Security Party.
16.10Agent’s memorandum account. The Agent shall maintain a memorandum account showing the amounts advanced
by the Lenders and all other sums owing to each Creditor Party from the Borrower and each Security Party under the
Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.

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16.11Accounts prima facie evidence. If any accounts maintained under Clauses 16.9 (Creditor Party Accounts) and 16.10
(Agent’s memorandum account) show an amount to be owing by the Borrower or a Security Party to a Creditor Party,
those accounts shall be prima facie evidence that that amount is owing to that Creditor Party in the absence of
manifest error.
16.12FATCA Information
(a) Subject to subclause (c) below, each party to a Finance Document shall, within ten Business Days of a
reasonable request by another party to the Finance Documents:
(i) confirm to that other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party;
(ii) supply to the requesting party such forms, documentation and other information relating to its status
under FATCA as the requesting party reasonably requests for the purposes of such requesting party’s
compliance with FATCA; and
(iii) supply to the requesting party such forms, documentation and other information relating to its status as
the requesting party reasonably requests for the purposes of the requesting party’s compliance with any
other law, regulation, or exchange of information regime.
(b) If a party to any Finance Document confirms to another party pursuant to subclause (a) above that it is a FATCA
Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that
party shall notify that other party and the Agent reasonably promptly.
(c) Subclause (a) above shall not oblige any Creditor Party to do anything, and Subclause (a) (iii) above shall not
oblige any other party to a Finance Document to do anything, which would or might in its reasonable opinion
constitute a breach of any law or regulation, any policy of that Creditor Party, any fiduciary duty or any duty of
confidentiality.
(d) If a party to any Finance Document fails to confirm whether or not it is a FATCA Exempt Party or to supply
forms, documentation or other information requested in accordance with subclause (a)(i) or (ii) above
(including, where paragraph (c) above applies), then such party shall be treated for the purposes of the Finance
Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the party in
question provides the requested confirmation, forms, documentation or other information.
16.13FATCA Deduction
(a) A party to any Finance Document may make any FATCA Deduction it is required to make by FATCA, and any
payment required in connection with that FATCA Deduction, and no party to any Finance Document shall be
required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise
compensate the recipient of the payment for that FATCA Deduction.
(b) A party to any Finance Document shall promptly, upon becoming aware that it must make a FATCA Deduction
(or that there is any change in the rate or the basis of such FATCA Deduction) notify the party to whom it is
making the payment and, in addition, shall notify the Borrower, the Agent and the other Creditor Parties.

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17 APPLICATION OF RECEIPTS
17.1 Normal order of application. Except as any Finance Document may otherwise provide, any sums which are
received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:
(a) FIRST: in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent and the Security
Trustee and the other Creditor Parties under the Finance Documents;
(b) SECONDLY: in or towards payment pro rata of any accrued interest due but unpaid under this Agreement;
(c) THIRDLY: in or towards payment pro rata of any principal due but unpaid under this Agreement;
(d) FOURTHLY: in or towards payment pro rata of any other amounts due but unpaid under any Finance Document;
(e) FIFTHLY: in retention of an amount equal to any amount not then due and payable under any Finance Document
but which the Lender, by notice to the Borrower and the Security Parties, states in its opinion will or may
become due and payable in the future and, upon those amounts becoming due and payable, in or towards
satisfaction of them in accordance with the provisions of Clause 17.1 (Normal order of application) (a), (b), (c)
and (d); and
(f) SIXTHLY: any surplus shall be paid to the Borrower or to any other person entitled to it.
17.2 Variation of order of application. The Agent may, with the authorisation of the Lenders, by notice to the Borrower,
the Security Parties and the other Creditor Parties provide for a different manner of application from that set out in
Clause 17.1 (Normal order of application) either as regards a specified sum or sums or as regards sums in a specified
category or categories.
17.3 Notice of variation of order of application. The Agent may give notices under Clause 17.2 (Variation of order of
application) from time to time; and such a notice may be stated to apply not only to sums which may be received or
recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day
before the date on which the notice is served.
17.4 Appropriation rights overridden. This Clause 17 and any notice which the Agent gives under Clause 17.2 (Variation
of order of application) shall override any right of appropriation possessed, and any appropriation made, by the
Borrower or any Security Party.
18 APPLICATION OF EARNINGS, LOCATION OF ACCOUNTS
18.1 Payment of Earnings. The Borrower undertakes with each Creditor Party to ensure that, throughout the Security
Period (subject only to the provisions of the Mortgages and the General Assignments), all the Earnings in respect of a
Ship are paid to the Earnings Account applicable to the Guarantor which is the owner of such Ship;
18.2 Application of Earnings. The Borrower undertakes with each Creditor Party that money from time to time credited
to, or for the time being standing to the credit of, an Earnings Account shall, unless and until an Event of Default or
Potential Event of Default shall have occurred (whereupon the provisions of Clause 17.1 (Normal order of application)
shall be and become applicable), be available for application in the following manner:
(a) FIRSTLY: in or towards meeting the costs, fees and expenses payable by the Borrower under the Finance
Documents;

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 (b) SECONDLY: in or towards making the transfers to the Retention Account pursuant to Clause 18.3 (Monthly
retentions); and
(c) THIRDLY: in or towards meeting the costs and expenses from time to time incurred by or on behalf of the
Borrower or the Guarantors in connection with the operation of the Ships.
18.3 Monthly retentions. The Borrower undertakes with each Creditor Party to ensure that, throughout the Security Period
on the same day in each month, there is transferred to the Retention Account:
(a) one-third of the repayment instalment in respect of the Loan falling due under Clause 8.1 (Payment of
Earnings) on the next Repayment Date; and
(b) the relevant fraction of the aggregate amount of interest on the Loan which is payable on the next due date for
payment of interest.
Where:
“relevant fraction” is a fraction of which the numerator is 1 and the denominator the number of months comprised
in the then current Interest Period (or, if current Interest Period ends after the next date for payment of interest under
this Agreement, the number of months from the later of the commencement of the current Interest Period or the last
due date for payment of interest to the next date for payment of interest under this Agreement).
18.4 Shortfall in Earnings. If the aggregate Earnings received in the Earnings Accounts are insufficient in any month for
the required amount to be transferred to any Retention Account under Clause 18.3 (Monthly retentions), the Borrower
shall make up the amount of the insufficiency by payment in Dollars to the Retention Account.
18.5 Application of retentions. Until an Event of Default or a Potential Event of Default occurs, the Account Bank shall on
each Repayment Date and on each due date for the payment of interest under this Agreement pay to the Agent, for the
Agent to distribute to the Lenders in accordance with Clause 16.4 so much of the then balance on the Retention
Account as equals:
(a) the repayment instalment due on that Repayment Date; or, as the case may be,
(b) the amount of interest payable on that interest payment date
in discharge of the Borrower’s liability for that repayment instalment or that interest.
18.6 Location of accounts. The Borrower shall promptly:
(a) comply, and procure that the Guarantors s comply, with any requirement of the Agent as to the location or
re-location of the Earnings Accounts, the Retention Account or any of them, provided that those accounts must
at all times be with the Account Bank; and
(b) execute, and procure that the Guarantors execute, any documents which the Agent specifies to create or
maintain in favour of the Security Trustee a Security Interest over the Earnings Accounts and the Retention
Account.
18.7 Borrower’s obligations unaffected. The provisions of this Clause 18 do not affect:
(a) the liability of the Borrower to make payments of principal and interest on the due dates; or
(b) any other liability or obligation of the Borrower or any Security Party under any Finance Document.

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19 EVENTS OF DEFAULT
19.1 Events of Default. An Event of Default occurs if:
(a) any Security Party fails to pay any sum payable by it under any of the Finance Documents at the time, in the
currency and in the manner stipulated in the Finance Documents (and so that, for this purpose, sums payable
(i) under clauses 5.1 and 8.1 shall be treated as having been paid at the stipulated time if (aa) received by the
Agent within two (2) days of the dates therein referred to and (bb) such delay in receipt is caused by
administrative or other delays or errors within the banking system and (ii) on demand shall be treated as
having been paid at the stipulated time if paid within three (3) Business Days of demand); or
(b) any breach occurs of Clause 9.3 (Conditions Subsequent), 11.2 (Title; negative pledge), 11.3 (No disposal of
assets), 11.24 (Sanctions), 12.2 (Maintenance of status), 12.3 (Negative Undertakings), 12.4 (Financial
covenants) or 15.2 (Provision of additional security; prepayment) of this Agreement; or
(c) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a
breach covered by paragraphs (a) or (b)) which, in the reasonable opinion of the Majority Lenders, is capable of
remedy, and such default continues unremedied 15 days after written notice from the Agent requesting action
to remedy the same; or
(d) (subject to any applicable grace period specified in any Finance Document) any breach by the Borrower or any
Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a),
(b) or (c)); or
(e) any representation, warranty or statement made or repeated by, or by an officer of, the Borrower or a Security
Party in a Finance Document or in the Drawdown Notice or any other notice or document relating to a Finance
Document is untrue or misleading in a material respect when it is made or repeated; or
(f) any of the following occurs in relation to any Financial Indebtedness (exceeding $10,000,000 in respect of the
Borrower and $1,000,000 for all other Relevant Persons) of a Relevant Person:
(i) any Financial Indebtedness of a Relevant Person is not paid when due; or
(ii) any Financial Indebtedness of a Relevant Person becomes due and payable prior capable of being
declared due and payable prior to its stated maturity date as a consequence of any event of default; or
(iii) any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or
other facility, or any swap or other derivative contract or transaction, relating to any Financial
Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a
result of any event of default, or cash cover is required, or becomes capable of being required, in respect
of such a facility as a result of any event of default; or
(iv) an event of default howsoever described (or any event which with the giving of notice, lapse of time,
determination of materiality or fulfillment of any other applicable condition or any combination of the
foregoing would constitute such an event of default) occurs under any document relating to Financial
Indebtedness of a Relevant Person; or

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 (v) any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or
(g) any of the following occurs in relation to a Relevant Person:
(i) a Relevant Person becomes, in the reasonable opinion of the Majority Lenders, unable to pay its debts as
they fall due; or
(ii) any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration
or distress, or any form of freezing order, in respect of a sum of, or sums aggregating, $10,000,000 or
more in respect of the Borrower and $1,000,000 or more for all other Relevant Persons or the equivalent
in another currency and, in respect of a Relevant Person other than a Security Party, the same is not
lifted within 30 days; or
(iii) any administrative or other receiver is appointed over any asset of a Relevant Person; or
(iv) an administrator is appointed (whether by the court or otherwise) in respect of a Relevant Person; or
(v) any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is
insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant
Person or, in any proceedings, by a lawyer acting for a Relevant Person; or
(vi) a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in
relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or
(vii) a resolution is passed, and administration notice is given or filed, an application or petition to a court is
made or presented or any other step is taken by (a) a Relevant Person, (b) the members or directors of a
Relevant Person, (c) a holder of Security Interests which together relate to all or substantially all of the
assets of a Relevant Person, or (d) a government minister or public or regulatory authority of a Pertinent
Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of
a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another
Relevant Person ceasing or suspending business operations or payments to creditors, save that this
paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower or a
Guarantor which is, or is to be, effected for the purposes of an amalgamation or reconstruction
previously approved by the Agent and effected not later than three months after the commencement of
the winding up; or
(viii) an administration notice is given or filed, an application or petition to a court is made or presented or any
other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which
together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a
Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant
Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional
liquidator or administration is being contested in good faith, on substantial grounds and not with a view
to some other insolvency law procedure being implemented instead and either (a) the application or
petition is dismissed

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 or withdrawn within 30 days of being made or presented, or (b) within 30 days of the administration
notice being given or filed, or the other relevant steps being taken, other action is taken which will
ensure that there be no administration and (in both cases (a) or (b)) the Relevant Person will continue to
carry on business in the ordinary way and without being the subject of any actual, interim or pending
insolvency law procedure; or
(ix) a Relevant Person or its directors take any steps (whether by making or presenting an application or
petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or
otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of
moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt or arrangement
with all or a substantial proportion (by number or value) of creditors or of any class of them or any such
moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court
order, by the filing of documents with a court, by means of a contract or in any other way at all; or
(x) any meeting of the members or directors, or of any committee of the board or senior management, of a
Relevant Person is held or summoned for the purpose of considering a resolution or proposal to authorise
or take any action of a type described in paragraphs (iv) to (ix) or a step preparatory to such action, or
(with or without such a meeting) the members, directors or such a committee resolve or agree that such
an action or step should be taken or should be taken if certain conditions materialise or fail to
materialise; or
(xi) in a Pertinent Jurisdiction other than England, any event occurs, any proceedings are opened or
commenced or any step is taken which, in the opinion of the Agent is similar to any of the foregoing; or
(h) any Security Party is in breach of or fails to observe any law, requirement, measure or procedure implemented
to combat “money laundering” as defined in Article 1 of the Directive 2015/849/EC of the Council of the
European Communities; or
(i) the Borrower or any Security Party ceases or suspends carrying on its business or a part of its business which,
in the opinion of the Majority Lenders, is material in the context of this Agreement or the other Finance
Documents; or
(j) it becomes unlawful or impossible:
(i) for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply
with any other obligation which the Majority Lenders consider material under a Finance Document; or
(ii) for the Agent, the Security Trustee or the Lenders to exercise or enforce any right under, or to enforce any
Security Interest created by, a Finance Document; or
(k) any consent necessary to enable a Guarantor to own, operate or charter its Ship or to enable the Borrower or
any Security Party to comply with any provision which the Majority Lenders consider material of a Finance
Document, the SPA or the Management Agreement (as applicable) is not granted, expires without being
renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or
(l) it appears to the Majority Lenders that, after the date of this Agreement and without their prior consent a
change has occurred in the legal or beneficial ownership of any of the shares in a Guarantor; or

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 (m) any provision which the Majority Lenders acting reasonably consider material of a Finance Document proves to
have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to
have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses
its priority to, another Security Interest or any other third party claim; or
(n) the security constituted by a Finance Document is in any way imperilled or in jeopardy and if, in the opinion of
the Majority Lenders, capable of remedy, such event or circumstance continues unremedied 14 days after
written notice from the Agent to the Borrower or relevant Security Party requesting action to remedy the same;
or
(o) any other event occurs or any other circumstances arise or develop including, without limitation:
(i) a change in the financial position, state of affairs or prospects of any Relevant Person; or
(ii) any accident or other event involving any Ship or another vessel owned, chartered or operated by a
Relevant Person; or
(iii) any litigation or proceedings are commenced or threatened against a Relevant Person,
in the light of which the Majority Lenders reasonably consider that:
(iv) there is a significant risk that the Borrower or any Security Party is, or will later become, unable to
discharge its liabilities under the Finance Documents as they fall due; or
(v) such event represents a material adverse change to the business of the Borrower or such Security Party.
19.2 Actions following an Event of Default.
On, or at any time after, the occurrence of an Event of Default:
(a) the Agent may, and if so instructed by the Majority Lenders, the Agent shall:
(i) serve on the Borrower a notice stating that all or part of the Commitments and of the other obligations of
each Lender to the Borrower under this Agreement are cancelled; and/or
(ii) serve on the Borrower a notice stating that all or part of the Loan together with accrued interest and all
other amounts accrued or owing under this Agreement are immediately due and payable or are due and
payable on demand; and/or
(iii) take any other action which, as a result of the Event of Default or any notice served under paragraph
(i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable
law; and/or
(b) the Security Trustee may, by notice to the Borrower, exercise any or all of its rights, remedies, powers or
discretions under the Finance Documents.

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19.3 Termination of Commitments. On the service of a notice under Clause 19.2(a)(i) (Actions following an Event of
Default), the Commitments and all other obligations of each Lender to the Borrower under this Agreement shall be
cancelled.
19.4 Acceleration of liabilities. On the service of a notice under Clause 19.2(a)19.2(a)(ii) (Actions following an Event of
Default), the Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any Security Party
under this Agreement and every other Finance Document shall become immediately due and payable or, as the case
may be, payable on demand.
19.5 Multiple notices; action without notice. The Agent may serve notices under Clause 19.219.2(a)(i) (Actions
following an Event of Default), or 19.2(a)(ii) simultaneously or on different dates and it and/or the Security Trustee may
take any action referred to in Clause 19.2 (Actions following an Event of Default), if no such notice is served or
simultaneously with or at any time after the service of both or either of such notices.
19.6 Notification of Creditor Parties and Security Parties. The Agent shall send to each Creditor Party and each
Security Party a copy or the text of any notice which the Agent serves on the Borrower under Clause 19.2 (Actions
following an Event of Default); but the notice shall become effective when it is served on the Borrower, and no failure
or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide
the Borrower or any Security Party with any form of claim or defence.
19.7 Lenders’ rights unimpaired. Nothing in this Clause shall be taken to impair or restrict the exercise of any right
given to individual Lenders under a Finance Document or the general law; and, in particular, this Clause is without
prejudice to Clause 3.1 (Interests several).
19.8 Exclusion of Creditor Party liability. No Creditor Party, and no receiver or manager appointed by the Security
Trustee, shall have any liability to the Borrower or a Security Party:
(a) for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance
Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or
(b) as mortgagee in possession or otherwise, for any income or principal amount which might have been produced
by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in
the value of such an asset;
except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have
been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Party’s own officers and
employees or (as the case may be) such receiver’s or manager’s own partners or employees.
19.9 Relevant Persons. In this Clause 19 a “Relevant Person” means the Borrower, a Guarantor and any other Security
Party (other than an Approved Manager that is not a Subsidiary of the Borrower) and any of their Subsidiaries.
19.10Interpretation. In Clause 19.119.1(f) (Events of Default) references to an event of default or a termination event
include any event, howsoever described, which is similar to an event of default in a facility agreement or a
termination event in a finance lease; and in Clause 19.1(g) (Events of Default) “petition” includes an application.
20 EXPENSES
20.1 Upfront fee. The Borrower shall pay to the Agent for the account of the Lenders pro rata in accordance with their
Commitments, on the Drawdown Date, a non-refundable upfront fee of $100,000.

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20.2 Costs of negotiation, preparation etc. The Borrower shall pay to the Agent on its demand the amount of all
expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or
registration of any Finance Document or any related document or with any transaction contemplated by a Finance
Document or a related document (including without limitation, any travel expenses).
20.3 Costs of variations, amendments, enforcement etc. The Borrower shall pay to the Agent, on the Agent’s
demand, for the account of the Creditor Party concerned the amount of all expenses incurred by a Creditor Party in
connection with:
(a) any amendment or supplement to a Finance Document, or any proposal for such an amendment to be made;
(b) any consent or waiver by the Lenders, the Majority Lenders or the Creditor Party concerned under or in
connection with a Finance Document, or any request for such a consent or waiver;
(c) the valuation of any security provided or offered under Clause 15 (Security Cover) or any other matter relating
to such security; or
(d) any step taken by the Creditor Party concerned with a view to the protection, exercise or enforcement of any
right or Security Interest created by a Finance Document or for any similar purpose (including without limitation
any litigation cost).
There shall be recoverable under paragraph (d) the full amount of all legal expenses, whether or not such as would be
allowed under rules of court or any taxation or other procedure carried out under such rules.
20.4 Documentary taxes. The Borrower shall promptly pay any tax payable on or by reference to any Finance Document,
and shall, on the Agent’s demand, fully indemnify each Creditor Party against any claims, expenses, liabilities and
losses resulting from any failure or delay by the Borrower to pay such a tax.
20.5 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified
amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without
necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due
shall be prima facie evidence that the amount, or aggregate amount, is due.
21 INDEMNITIES
21.1 Indemnities regarding borrowing and repayment of Loan. The Borrower shall fully indemnify each Creditor
Party on the Agent’s demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and
losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably
and with due diligence estimates that it will incur, as a result of or in connection with:
(a) the Loan not being borrowed on the date specified in the Drawdown Notice for any reason other than a default
by the Lender claiming the indemnity;
(b) the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an
Interest Period or other relevant period;
(c) any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance
Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the
Borrower on the amount concerned under Clause 7 (Default Interest));

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 (d) the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration
of repayment of the Loan or any part of it under Clause 19 (Events of Default); and
(e) any tax (other than tax on its overall net income) for which a Creditor Party is liable in connection with any
amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance
Document.
21.2 Breakage costs. Without limiting its generality, Clause 21.1 (Indemnities regarding borrowing and repayment of
Loan) covers any claim, expense, liability or loss, including a loss of a prospective profit, incurred by a Lender:
(a) in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part
of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any
overdue amount); and
(b) in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction
entered into (whether with another legal entity or with another office or department of the Lender concerned) to
hedge any exposure arising under this Agreement or that part which the Lender concerned determines is fairly
attributable to this Agreement of the amount of the liabilities, expenses or losses (including losses of
prospective profits) incurred by it in terminating, or otherwise in connection with, a number of transactions of
which this Agreement is one.
21.3 Miscellaneous indemnities. The Borrower shall fully indemnify each Creditor Party severally on their respective
demands in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by
a Creditor Party, in any country, as a result of or in connection with:
(a) any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by
the Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance
Document; or
(b) any other Pertinent Matter;
other than claims, expenses, liabilities and losses which are shown to have been directly and mainly caused by the
dishonesty or wilful misconduct of the officers or employees of the Creditor Party concerned.
Without prejudice to its generality, this Clause 21.3 covers any claims, expenses, liabilities and losses which arise, or
are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code, the MARPOL
Protocol or any Environmental Law.
21.4 Currency indemnity. If any sum due from the Borrower or any Security Party to a Creditor Party under a Finance
Document or under any order or judgment relating to a Finance Document has to be converted from the currency in
which the Finance Document provided for the sum to be paid (the “Contractual Currency”) into another currency
(the “Payment Currency”) for the purpose of:
(a) making or lodging any claim or proof against the Borrower or any Security Party, whether in its liquidation, any
arrangement involving it or otherwise; or
(b) obtaining an order or judgment from any court or other tribunal; or

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 (c) enforcing any such order or judgment;
the Borrower shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment
actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.
In this Clause 21.4 the “available rate of exchange” means the rate at which the Creditor Party concerned is able at
the opening of business (Rotterdam time) on the Business Day after it receives the sum concerned to purchase the
Contractual Currency with the Payment Currency.
This Clause 21.4 creates a separate liability of the Borrower which is distinct from their other liabilities under the
Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.
21.5 Certification of amounts. A notice which is signed by 2 officers of a Creditor Party, which states that a specified
amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without
necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due
shall be prima facie evidence that the amount, or aggregate amount, is due.
21.6 Sums deemed due to a Lender. For the purposes of this Clause 21, a sum payable by the Borrower to the Agent or
the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.
22 NO SET-OFF OR TAX DEDUCTION
22.1 No deductions. All amounts due from the Borrower under a Finance Document shall be paid:
(a) without any form of set-off, cross-claim or condition; and
(b) free and clear of any tax deduction except a tax deduction which the Borrower is required by law to make.
22.2 Grossing-up for taxes. If the Borrower is required by law to make a tax deduction from any payment (other than a
FATCA Deduction):
(a) the Borrower shall notify the Agent as soon as it becomes aware of the requirement;
(b) the Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event
before any fine or penalty arises;
(c) the amount due in respect of the payment shall be increased by the amount necessary to ensure that each
Creditor Party receives and retains (free from any liability relating to the tax deduction) a net amount which,
after the tax deduction, is equal to the full amount which it would otherwise have received.
22.3 Evidence of payment of taxes. Within 1 month after making any tax deduction, the Borrower concerned shall
deliver to the Agent documentary evidence satisfactory to the Agent that the tax had been paid to the appropriate
taxation authority.
22.4 Exclusion of tax on overall net income. In this Clause 22 “tax deduction” means any deduction or withholding
for or on account of any present or future tax except tax on a Creditor Party’s overall net income.

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23 ILLEGALITY, ETC
23.1 Illegality. This Clause 23 applies if a Lender (the “Notifying Lender”) notifies the Agent that it has become, or will
with effect from a specified date, become:
(a) unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a
change in the manner in which an existing law is or will be interpreted or applied; or
(b) contrary to, or inconsistent with, any regulation,
for the Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner
contemplated by this Agreement.
23.2 Notification of illegality. The Agent shall promptly notify the Borrower, the Security Parties, and each of the Creditor
Parties of the notice under Clause 23.1 (Illegality) which the Agent receives from the Notifying Lender.
23.3 Prepayment; termination of Commitment. On the Agent notifying the Borrower under Clause 23.2 (Notification of
illegality), the Notifying Lender’s Commitment shall terminate; and thereupon or, if later, on the date specified in the
Notifying Lender’s notice under Clause 23.1 (Illegality) as the date on which the notified event would become effective
the Borrower shall prepay the Notifying Lender’s Contribution in accordance with Clause 8 (Repayment and
Prepayment).
23.4 Mitigation. If circumstances arise which would result in a notification under Clause 23.1 (Illegality) then, without in
any way limiting the rights of the Notifying Lender under Clause 23.3 (Prepayment, termination of Commitment), the
Notifying Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement
and the Finance Documents to another office or financial institution not affected by the circumstances but the Notifying
Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:
(a) have an adverse effect on its business, operations or financial condition; or
(b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with,
any regulation; or
(c) involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.
24 INCREASED COSTS
24.1 Increased costs. This Clause 24 applies if a Lender (the “Notifying Lender”) notifies the Agent that the Notifying
Lender considers that as a result of:
(a) the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this
Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the
application to payments under this Agreement of a tax on the Lender’s overall net income); or
(b) complying with any regulation (including any which relates to capital adequacy or liquidity controls or which
affects the manner in which the Notifying Lender allocates capital resources to its obligations under this
Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the
date of this Agreement, the Notifying Lender (or a parent company of it) has incurred or will incur an
“increased cost”.

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24.2 Meaning of “increase cost”. In this Clause 24, “increased cost” means, in relation to a Notifying Lender:
(a) an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having
entered into, or being a party to, this Agreement or a Transfer Certificate, of funding or maintaining its
Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or
any part of its Contribution or other unpaid sums;
(b) a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective
return which such a payment represents to the Notifying Lender or on its capital;
(c) an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of
advances formed by or including the Notifying Lender’s Contribution or (as the case may require) the
proportion of that cost attributable to the Contribution; or
(d) an additional or increased cost of funding all or maintaining all or any part the Notifying Lender’s Contributions
or other unpaid sums or (as the case may require) the proportion of that cost attributable to the Contributions
or other unpaid sums; or
(e) a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received
or receivable by the Notifying Lender under this Agreement;
but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a
parent company of it) or an item covered by the indemnity for tax in Clause 21.1 (Indemnities regarding borrowing any
repayment of Loan) or by Clause 22 (No Set-Off or Tax Deduction).
For the purposes of this Clause 24.2 the Notifying Lender may in good faith allocate or spread costs and/or losses
among its assets and liabilities (or any class of its assets and liabilities) on such basis as it considers appropriate.
24.3 Notification to Borrower of claim for increased costs. The Agent shall promptly notify the Borrower and the
Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1 (Increased Costs).
24.4 Payment of increased costs. The Borrower shall pay to the Agent, on the Agent’s demand, for the account of the
Notifying Lender the amounts which the Agent from time to time notifies the Borrower that the Notifying Lender has
specified to be necessary to compensate the Notifying Lender for the increased cost.
24.5 Notice of prepayment; cancellation. If the Borrower is not willing to continue to compensate the Notifying Lender
for the increased cost under Clause 24.4 (Payment of increased costs), the Borrower may give the Agent not less than
14 days’ notice of their intention to:
(a) prepay the Notifying Lender’s Contribution at the end of an Interest Period; and/or
(b) cancel the Notifying Lender’s Available Commitment.

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24.6 Prepayment; termination of Commitment. A notice under Clause 24.5 (Notice of prepayment; cancellation) shall
be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrower’s notice of intended prepayment
and/or cancellation; and:
(a) on the date on which the Agent serves that notice, the Available Commitment of the Notifying Lender shall be
cancelled;
(b) on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or
penalty) the Notifying Lender’s Contribution, together with accrued interest thereon at the applicable rate plus
the Margin.
25 SET-OFF
25.1 Application of credit balances. Each Creditor Party may, following the occurrence of an Event of Default which is
continuing, without prior notice:
(a) apply any balance (whether or not then due) which at any time stands to the credit of any account in the name
of the Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then
due from the Borrower to that Creditor Party under any of the Finance Documents; and
(b) for that purpose:
(i) break, or alter the maturity of, all or any part of a deposit of the Borrower;
(ii) convert or translate all or any part of a deposit or other credit balance into Dollars; and
(iii) enter into any other transaction or make any entry with regard to the credit balance which the Creditor
Party concerned considers appropriate.
25.2 Existing rights unaffected. No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1
(Application of credit balances); and those rights shall be without prejudice and in addition to any right of set-off,
combination of accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the
general law or any document).
25.3 Sums deemed due to a Creditor Party. For the purposes of this Clause 25, a sum payable by the Borrower to the
Agent or the Security Trustee for distribution to, or for the account of, any Creditor Party shall be treated as a sum due
to that Creditor Party; and each Creditor Party’s proportion of a sum so payable for distribution to, or for the account of,
the Creditor Parties shall be treated as a sum due to such Creditor Party.
25.4 No Security Interest. This Clause 25 gives the Creditor Parties a contractual right of set-off only, and does not create
any equitable charge or other Security Interest over any credit balance of the Borrower.
26 TRANSFERS AND CHANGES IN LENDING AND BOOKING OFFICES
26.1 Transfer by Borrower. The Borrower may not, without the consent of the Agent, given on the instructions of all the
Lenders transfer any of its rights, liabilities or obligations under any Finance Document.

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26.2 Transfer by a Lender. Subject to Clause 26.4 (Effective Date of Transfer Certificate), a Lender (the “Transferor
Lender”) may, (i) if such transfer is to any bank or financial institution affiliated to a Lender or if such transfer is made
while an Event of Default is continuing, without the consent of the Borrower or (ii) if such transfer is to any arm’s
length bank or financial institution, with the prior consent of the Borrower, (such consent not to be unreasonably
withheld or delayed) at any time, cause:
(a) its rights in respect of all or part of its Contribution; or
(b) its obligations in respect of all or part of its Commitment; or
(c) a combination of (a) and (b);
to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial
institution (a “Transferee Lender”) by delivering to the Agent a completed certificate in the form set out in Schedule
4 with any modifications approved or required by the Agent (a “Transfer Certificate”) executed by the Transferor
Lender and the Transferee Lender.
However any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be
dealt with separately in accordance with the Agency and Trust Deed.
26.3 Transfer Certificate, delivery and notification. As soon as reasonably practicable after a Transfer Certificate is
delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):
(a) sign the Transfer Certificate on behalf of itself, the Borrower, the Security Parties and each of the Creditor
Parties;
(b) on behalf of the Transferee Lender, send to the Borrower and each Security Party letters or faxes notifying them
of the Transfer Certificate and attaching a copy of it;
(c) send to the Transferee Lender copies of the letters or faxes sent under paragraph (b) above.
26.4 Effective Date of Transfer Certificate. A Transfer Certificate becomes effective on the date, if any, specified in the
Transfer Certificate as its effective date, Provided that it is signed by the Agent under Clause 26.3 (Transfer
Certificate, delivery and notification) on or before that date.
26.5 No transfer without Transfer Certificate. No assignment or transfer of any right or obligation of a Lender under
any Finance Document is binding on, or effective in relation to, the Borrower, any Security Party, the Agent or the
Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.
26.6 Lender re-organisation; waiver of Transfer Certificate. However, if a Lender enters into any merger, de-merger
or other reorganisation as a result of which all its rights or obligations vest in another person (the “successor”), the
Agent may, if it sees fit, by notice to the successor and the Borrower and the Security Trustee waive the need for the
execution and delivery of a Transfer Certificate; and, upon service of the Agent’s notice, the successor shall become a
Lender with the same Commitment and Contribution as were held by the predecessor Lender.

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26.7 Effect of Transfer Certificate. A Transfer Certificate takes effect in accordance with English law as follows:
(a) to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which
the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender
absolutely, free of any defects in the Transferor Lender’s title and of any rights or equities which the Borrower
or any Security Party had against the Transferor Lender;
(b) the Transferor Lender’s Commitment is discharged to the extent specified in the Transfer Certificate;
(c) the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a
Commitment of an amount specified in the Transfer Certificate;
(d) the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to
the Lenders generally, including those about pro-rata sharing and the exclusion of liability on the part of, and
the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender
becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender
ceases to be bound by them;
(e) any part of the Loan which the Transferee Lender advances after the Transfer Certificate’s effective date ranks
in point of priority and security in the same way as it would have ranked had it been advanced by the
Transferor Lender, assuming that any defects in the transferor’s title and any rights or equities of the Borrower
or any Security Party against the Transferor Lender had not existed;
(f) the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to
the Lenders generally, including but not limited to those relating to the Majority Lenders and those under
Clause 5.7 (Market disruption) and Clause 20 (Expenses), and to the extent that the Transferee Lender becomes
entitled to such rights, the Transferor Lender ceases to be entitled to them; and
(g) in respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document or any
misrepresentation made in or in connection with a Finance Document, the Transferee Lender shall be entitled to
recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation,
irrespective of whether the original Lender would have incurred a loss of that kind or amount.
The rights and equities of the Borrower or any Security Party referred to above include, but are not limited to, any right
of set off and any other kind of cross-claim.
26.8 Maintenance of register of Lenders. During the Security Period the Agent shall maintain a register in which it shall
record the name, Commitment, Contribution and administrative details (including the lending office) from time to time
of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4 (Effective Date of
Transfer Certificate) of the Transfer Certificate; and the Agent shall make the register available for inspection by any
Creditor Party and the Borrower during normal banking hours, subject to receiving at least 3 Business Days prior
notice.
26.9 Reliance on register of Lenders. The entries on that register shall, in the absence of manifest error, be conclusive
in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the
effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance
Documents for all purposes relating to the Finance Documents.
26.10Authorisation of Agent to sign Transfer Certificates. The Borrower and each Creditor Party irrevocably authorise
the Agent to sign Transfer Certificates on its behalf.

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26.11Registration fee. In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of
$1,000 from the Transferor Lender or (at the Agent’s option) the Transferee Lender.
26.12Sub-participation; subrogation assignment. A Lender may sub-participate all or any part of its rights and/or
obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower,
any Security Party, or the other Creditor Parties; and the Lenders may assign, in any manner and terms agreed by the
Majority Lenders, the Agent and the Security Trustee, all or any part of those rights to an insurer or surety who has
become subrogated to them.
26.13Disclosure of information. A Lender may disclose to a potential Transferee Lender or sub-participant any
information which the Lender has received in relation to the Borrower, any Security Party or their affairs under or in
connection with any Finance Document, unless the information is clearly of a confidential nature.
Without prejudice to the above, the Borrower irrevocably authorises each Creditor Party to give, divulge and reveal
from time to time information and details relating to its accounts, the Finance Documents and the facilities granted
pursuant thereto to any authorities, each Creditor Party’s head office, branches and affiliates, any other parties to the
Finance Documents and any person regarding any funding, operational arrangement or other transaction in relation
thereto, including without limitation, for purposes in connection with any enforcement or assignment or transfer of any
of the Creditor Parties’ rights and obligations. This authorisation shall survive and continue in full force and effect for
the benefit of each Creditor Party notwithstanding the repayment, cancellation or termination of the Loan or any part
thereof and/or the termination of one or more types of banker-customer relationships between any Security Party and
the relevant Creditor Party.
26.14Change of lending or booking office. A Lender may, at its own cost, change its lending or booking office, as the
case may be, by giving notice to the Agent and the change shall become effective on the later of:
(a) the date on which the Agent receives the notice; and
(b) the date, if any, specified in the notice as the date on which the change will come into effect,
provided that the Borrower shall bear no additional obligations as a result of such change in lending office.
On receiving such a notice, the Agent shall notify the Borrower and the Security Trustee; and, until the Agent receives
such a notice, it shall be entitled to assume that a Lender is acting through the lending or booking office, as the case
may be, of which the Agent last had notice.
26.15Replacement of Reference Bank. If any Reference Bank ceases to be a Lender or is unable on a continuing basis to
supply quotations for the purposes of Clause 5 (Interest) then, unless the Borrower, the Agent and the Majority Lenders
otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrower, shall
appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment
comes into effect, the first-mentioned Reference Bank’s appointment shall cease to be effective.
26.16Confidential Information Each Creditor Party agrees to keep all Confidential Information confidential and not to
disclose it to anyone, save to the extent permitted by Clause 26.17 (Disclosure of Confidential Information) and Clause
26.18 (Disclosure to numbering service providers), and to ensure that all Confidential Information is protected with
security measures and a degree of care that would apply to its own confidential information.

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26.17Disclosure of Confidential Information In this Clause, “Representative” means any delegate, agent, manager,
administrator, nominee, attorney, trustee or custodian.
Any Creditor Party may disclose:
(a) to any of its Affiliates and any of its or their officers, directors, employees, professional advisers, insurers, reinsurers
and insurance brokers, auditors, partners and Representatives such Confidential Information as that Creditor Party
shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph
is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-
sensitive information except that there shall be no such requirement to so inform if the recipient is subject to
professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of
confidentiality in relation to the Confidential Information;
(b) to any person:
(i) to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights
and/or obligations under one or more Finance Documents and to any of that person’s Affiliates,
Representatives and professional advisers;
(ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any
sub-participation in relation to, or any other transaction under which payments are to be made or may be
made by reference to, one or more Finance Documents and/or one or more Security Parties and to any of
that person’s Affiliates, Representatives and professional advisers;
(iii) appointed by any Creditor Party or by a person to whom sub-paragraph (a) or (b) above applies to receive
communications, notices, information or documents delivered pursuant to the Finance Documents on its
behalf;
(iv) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or
indirectly, any transaction referred to in sub-paragraph (a) or (b) above;
(v) to whom information is required or requested to be disclosed by (i) any governmental, banking, taxation
or other regulatory authority or similar body, or the rules of any relevant stock exchange; or (ii) pursuant
to any applicable law or regulation; or (iii) by any court of competent jurisdiction; and (iv) in connection
with and for the purposes of any litigation, arbitration or other proceedings or dispute.
(vi) to whom or for whose benefit that Creditor Party charges, assigns or otherwise creates a Security Interest
(or may do so);
(vii) who is a Party; or
(viii) with the consent of the Borrower;

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 in each case, such Confidential Information as that Creditor Party shall consider appropriate if:
(1) in relation to sub-paragraphs (i), (ii) and (iii) above, the person to whom the Confidential Information is
to be given has entered into a Confidentiality Undertaking except that there shall be no requirement
for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional
obligations to maintain the confidentiality of the Confidential Information;
(2) in relation to sub-paragraph (iv) above, the person to whom the Confidential Information is to be given
has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality
in relation to the Confidential Information they receive and is informed that some or all of such
Confidential Information may be price-sensitive information;
(c) to any person appointed by that Creditor Party or by a person to whom sub-paragraph (a) or (b) above applies to
provide administration or settlement services in respect of one or more of the Finance Documents including without
limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential
Information as may be required to be disclosed to enable such service provider to provide any of the services referred
to in this sub Clause if the service provider to whom the Confidential Information is to be given has entered into a
confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With
Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the
Borrower and the relevant Creditor Party;
(d) to any rating agency (including its professional advisers) such Confidential Information as may be required to be
disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents
and/or the Security Parties.
26.18Disclosure to numbering service providers
(a) Notwithstanding any other term of any Finance Document or any other agreement between the Parties to the contrary
(whether express or implied) any Creditor Party may disclose to any national or international numbering service
provider appointed by that Creditor Party to provide identification numbering services in respect of this Agreement, the
Facility and/or one or more Security Parties the following information:
(i) names of Security Parties;
(ii) country of domicile of Security Parties;
(iii) place of incorporation or formation (as the case may be) of Security Parties;
(iv) date and governing law of this Agreement;
(v) the name of the Agent;
(vi) date of each amendment and restatement of this Agreement;
(vii) amount of the Loan and the Total Commitments;
(viii) currency of the Loan;
(ix) type of Loan;
(x) ranking of Loan;

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 (xi) final Repayment Date;
(xii) changes to any of the information previously supplied pursuant to paragraphs (i) to (xi) above; and
(xiii) such other information agreed between such Creditor Party and the Borrower,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b) The Parties acknowledge and agree that each identification number assigned to this Agreement, the Loan and/or one or
more Security Parties by a numbering service provider and the information associated with each such number may be
disclosed to users of its services in accordance with the standard terms and conditions of that numbering service
provider.
(c) Each Security Party represents that none of the information set out in paragraphs (a) to (m) of Clause 26.18(a) above
is, nor will at any time be, unpublished price-sensitive information.
(d) The Agent shall notify the Borrower and the other Creditor Parties of:
(i) the name of any numbering service provider appointed by the Agent in respect of this Agreement, the
Facility and/or one or more Security Parties; and
(ii) the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more
Security Parties by such numbering service provider.
26.19Disclosure to administration/settlement services providers. Notwithstanding any other term of any Finance
Document or any other agreement between the Parties to the contrary (whether express or implied), any Creditor Party
may disclose to any person appointed by:
(a) that Creditor Party;
(b) a person to (or through) whom that Creditor Party assigns or transfers (or may potentially assign or transfer) all or any
of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially
succeed) it as Agent or Security Trustee under this Agreement; and/or
(c) a person with (or through) whom that Creditor Party enters into (or may potentially enter into) any sub-participation in
relation to, or any other transaction under which payments are to be made, or may be made, by reference to, one or
more Finance Documents and/or one or more Security Parties,
to provide administration or settlement services in respect of one or more of the Finance Documents including without
limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential
Information as may be required to be disclosed to enable such service provider to provide any of the services referred
to in this Clause if the service provider to whom the Confidential Information is to be given has entered into a
confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for use with
Administration/ Settlement Services Providers or such other form of confidentiality undertaking agreed between the
Borrower and the relevant Creditor Party.

74
26.20Entire agreement Clauses 26.16 to 26.23 (inclusive) (Confidentiality) constitute the entire agreement between the
Parties in relation to the obligations of the Creditor Parties under the Finance Documents regarding Confidential
Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
26.21Inside information Each of the Creditor Parties acknowledges that some or all of the Confidential Information is or
may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable
legislation including securities law relating to insider dealing and market abuse and each of the Creditor Parties
undertakes not to use any Confidential Information for any unlawful purpose.
26.22Notification of disclosure Each of the Creditor Parties agrees (to the extent permitted by law and regulation) to
inform the Borrower:
(a) of the circumstances of any disclosure of Confidential Information made pursuant to sub-paragraph (e) of Clause 26.17
(Disclosure of Confidential Information) except where such disclosure is made to any of the persons referred to in that
paragraph during the ordinary course of its supervisory or regulatory function; and
(b) upon becoming aware that Confidential Information has been disclosed in breach of Clauses 26.16 to 26.23 (inclusive)
(Confidentiality).
26.23Continuing obligations The obligations in Clause 26.16 to 26.23 (inclusive) (Confidentiality) are continuing and, in
particular, shall survive and remain binding on each Creditor Party for a period of twelve (12) months from the earlier
of:
(a) the date on which all amounts payable by the Security Parties under or in connection with this Agreement have been
paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b) the date on which such Creditor Party otherwise ceases to be a Creditor Party.
27 VARIATIONS AND WAIVERS
27.1 Variations, waivers etc. by Majority Lenders. Subject to Clause 27.2 (Variations, waivers etc. requiring agreement
of all Lenders), a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or
any Creditor Party’s rights or remedies under such a provision or the general law, only if the document is signed, or
specifically agreed to by letter or fax, by the Borrower, by the Agent on behalf of the Majority Lenders, by the Agent
and the Security Trustee in their own rights, and, if the document relates to a Finance Document to which a Security
Party is party, by that Security Party.
27.2 Variations, waivers etc. requiring agreement of all Lenders. However, as regards the following, Clause 27.1
(Variations, waivers etc. by Majority Lenders) applies as if the words “by the Agent on behalf of the Majority Lenders”
were replaced by the words “by or on behalf of every Lender”:
(a) a change in the Margin or in the definition of LIBOR;

75
 (b) a change to the date for, the amount of, any payment of principal, interest, fees, or other sum payable under
this Agreement;
(c) a change to any Lender’s Commitment;
(d) an extension of Availability Period;
(e) a change to the definition of “Majority Lenders” or “Finance Documents”;
(f) a change to the preamble or to Clause 2 (Facility), 3 (Position of the Lenders), 4 (Drawdown), 5.1 (Payment of
normal interest), 10.23 (Sanctions), 11.23 (Sanctions), 17 (Application of Receipts), 18 (Application of Earnings,
Location of Accounts) or 31 (Law and Jurisdiction);
(g) a change to this Clause 27;
(h) any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement
set out in a Finance Document; and
(i) any other change or matter as regards which this Agreement or another Finance Document expressly provides
that each Lender’s consent is required.
27.3 Exclusion of other or implied variations. Except for a document which satisfies the requirements of Clauses 27.1
(Variations, waivers etc. by Majority Lenders) and 27.2 (Variations, waivers etc. requiring agreement of all Lenders), no
document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor
Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of
them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or
being precluded (permanently or temporarily) from enforcing, relying on or exercising:
(a) a provision of this Agreement or another Finance Document; or
(b) an Event of Default; or
(c) a breach by the Borrower or a Security Party of an obligation under a Finance Document or the general law; or
(d) any right or remedy conferred by any Finance Document or by the general law;
and there shall not be implied into any Finance Document any term or condition requiring any such provision to be
enforced, or such right or remedy to be exercised, within a certain or reasonable time.
27.4 Co-operation on potential restructuring of facilities. Provided the Lenders have provided their consent to the
relevant tax enhancement structure (upon such terms as are acceptable to the Lenders), the Lenders will provide
reasonable co-operation for such changes as are necessary (at the Borrower’s costs) relating to such tax enhancement
transaction.
28 NOTICES
28.1 General. Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall
be given by letter or fax or electronic message; and references in the Finance Documents to written notices, notices in
writing and notices signed by particular persons shall be construed accordingly.

76
28.2 Addresses for communications. A notice shall be sent:
(a) to the Borrower: 7 Avenue de Grande BretagneOffice 11B2
Monte Carlo, MC 98000 Monaco
Fax no: +377 97 98 21 41
(b) to a Lender: At the address below its name in Schedule 1 or (as the case may require)
in the relevant Transfer Certificate.
(c) to the Agent and the Security Trustee Gustav Mahlerlaan 10,
1082 PP Amsterdam
The Netherlands
Attn: Global Transportation & Logistics
Fax no: +31 (0) 10 401 53 23
or to such other address as the relevant party may notify to the Agent or, if the relevant party is the Agent or the
Security Trustee, the Borrower, the Lenders and the Security Parties.
28.3 Effective date of notices. Subject to Clauses 28.4 (Service outside business hours) and 28.5 (Illegible notices):
(a) a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the
time when it is delivered;
(b)
(c) a notice which is sent by fax or electronic message shall be deemed to be served, and shall take effect, 2 hours
after its transmission is completed.
28.4 Service outside business hours. However, if under Clause 28.3 (Effective date of notices) a notice would be
deemed to be served:
(a) on a day which is not a business day in the place of receipt; or
(b) on such a business day, but after 5 p.m. local time;
the notice shall (subject to Clause 28.5 (Illegible notices)) be deemed to be served, and shall take effect, at 9 a.m. on
the next day which is such a business day.
28.5 Illegible notices. Clauses 28.3 (Effective date of notices) and 28.4 (Service outside business hours) do not apply if
the recipient of a notice notifies the sender within 1 hour after the time at which the notice would otherwise be
deemed to be served that the notice has been received in a form which is illegible in a material respect.
28.6 Valid notices. A notice under or in connection with a Finance Document shall not be invalid by reason that its
contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any
other Finance Document under which it is served if:
(a) the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case
may be, has not caused any party to suffer any significant loss or prejudice; or

77
(b) in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the
notice was served what the correct or missing particulars should have been.
28.7 English language. Any notice under or in connection with a Finance Document shall be in English.
28.8 Meaning of “notice”. In this Clause 28, “notice” includes any demand, consent, authorisation, approval, instruction,
waiver or other communication.
29 PARALELL DEBT
29.1 Parallel Debt
Notwithstanding any other provision of the Finance Documents, the Borrower hereby irrevocably and unconditionally
undertakes to pay to the Security Trustee, as creditor in its own right and not as representative of the other Creditor
Parties, sums equal to and in the currency of each amount payable by the Borrower and any Security Party to any
Creditor Party under any Finance Document as and when that amount falls due for payment under the relevant Finance
Document or would have fallen due but for any discharge resulting from failure of another Creditor Party to take
appropriate steps, in insolvency proceedings affecting that Borrower, to preserve its entitlement to be paid that
amount (the “Parallel Debt”).
The Security Trustee shall have its own independent right to demand payment of the amounts payable by the
Borrower under this Clause 29.1, irrespective of any discharge of the Borrower and/or any Security Party’s obligation to
pay those amounts to the other Creditor Parties resulting from failure by them to take appropriate steps, in insolvency
proceedings affecting that Borrower and/or any Security Party, to preserve their entitlement to be paid those amounts.
Any amount due and payable by the Borrower to the Security Trustee under this Clause 29.1 shall be decreased to the
extent that the other Creditor Parties have received (and are able to retain) payment in full of the corresponding
amount under the other provisions of the Finance Documents and any amount due and payable by the Borrower and/or
a Security Party to the other Creditor Parties under those provisions shall be decreased to the extent the Security
Trustee has received (and is able to retain) payment in full of the corresponding amount under this Clause 29.1.
The Borrower and the Creditor Parties acknowledge that, in respect of the Parallel Debt, the Security Trustee acts in its
own name and not as representative of the Creditor Parties or any of them.

78
30 SUPPLEMENTAL
30.1 Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents give to each Creditor
Party are:
(a) cumulative;
(b) may be exercised as often as appears expedient; and
(c) shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right
or remedy conferred by any law.
30.2 Severability of provisions. If any provision of a Finance Document is or subsequently becomes void, unenforceable
or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document
or of the provisions of any other Finance Document.
30.3 Counterparts. A Finance Document may be executed in any number of counterparts.
30.4 Third party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.
31 LAW AND JURISDICTION
31.1 English law. This Agreement shall be governed by, and construed in accordance with, English law.
31.2 Exclusive English jurisdiction. Subject to Clause 31.3 (Choice of forum for the exclusive benefit of the Creditor
Parties), the courts of England shall have exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement.
31.3 Choice of forum for the exclusive benefit of the Creditor Parties. Clause 31.2 (Exclusive English jurisdiction) is
for the exclusive benefit of the Creditor Parties, each of which reserves the right:
(a) to commence proceedings in relation to any matter which arises out of or in connection with this Agreement in
the courts of any country other than England and which have or claim jurisdiction to that matter; and
(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to
proceedings in England or without commencing proceedings in England.
The Borrower shall not commence any proceedings in any country other than England in relation to a matter which
arises out of or in connection with this Agreement.
31.4 Process agent. The Borrower irrevocably appoints Hill Dickinson LLP at present of Broadgate Tower, 20 Primrose
Street, London EC2A 2EW, England to act as its agent to receive and accept on its behalf any process or other
document relating to any proceedings in the English courts which are connected with this Agreement.
31.5 Creditor Party rights unaffected. Nothing in this Clause 31 (Law and Jurisdiction) shall exclude or limit any right
which any Creditor Party may have (whether under the law of any country, an international convention or otherwise)
with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any
similar or related matter in any jurisdiction.

79
31.6 Meaning of “proceedings”. In this Clause 31, “proceedings” means proceedings of any kind, including an
application for a provisional or protective measure.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

80
 EXECUTION PAGE

SIGNED by /s/ GEORGIOS PANAGAKIS )

for and on behalf of )
NAVIOS MARITIME PARTNERS L.P. )
in the presence of: ) /s/ Francisco Tazelaar

SIGNED by /s/ ROBIN LLOYD PARRY )

And by /s/ STAVROULA MYLONA )
for and on behalf of )
ABN AMRO BANK N.V. as Agent and )
Security Trustee )
in the presence of: ) /s/ R. PARRY S.MYLONA

SIGNED by /s/ ROBIN LLOYD PARRY )

And by /s/ STAVROULA MYLONA )
for and on behalf of )
ABN AMRO BANK N.V. )
as a Lender )
in the presence of: ) /s/ R. PARRY S.MYLONA

81
Sarfaesi Act

S.13
discretion of the bank to either proceed against the borrower under the SARFAESI or RDB or
not to proceed.
by virtue of this notice, I am giving you an option to repay your loan. it envisages a time span-
60 days. if not repaid then I will sell off your property under s.13(4).
the minute the notice is issued, in other legislation, there is a moratorium created. but this is
not available in this act then the borrower can sell off the property once he receives the notice.
it vitiates the purpose of this notice then.
if borrower not able to pay in those 60days. he can make a representation. giving reasons.
convincing enough reasons to the bank. once this representation is made under the 60days. in
the next 15dasy period, the bank must decide the representation.
bank duty bound to provide an opportunity to the borrower to make a representation. the bank
usually ends up rejecting the representation of the borrower.
only if they want to proceed against the borrower do they proceed under s13(2) otherwise they
don’t. compliance to PNJ.
objection could be made with respect to the discrepancy in the books of accounts with the
borrower and the bank. say that the bank says loan amount left to pay is 15cr but that with the
borrower is only 13cr.
Could be about plight of borrower
bank might not get physical possession of the property. it could have found a buyer willing to
buy the property. even without getting physical possession, the bank can sell off the property
as it has title deeds under the loan agreement.
why would they be willing to buy the property that would potentially be a part of a lis? it could
be because the property is coming at a low price. the valuation is done also before the
auctioning of the property. because there coudl be a time lapse between the receipt of the
property at the time of the sanctioning of the loan and the auctioning of the propertty.
on the lines of appointment of a receiver.
bank's authorised agent appointed as a receiver to look after the property.

agreement to sale does not require the sale deed no need of title deed.
S.14
if the bank wants to get the physical possession of the property of the individual, and this
property is not going to be handed over immediately, and willingly. the collector directs the
enforcement agency- police to send a force with the authorised agent of the bank to go get the
possession of the secured asset.
14 as a remedy can never be invoked in after 13(4). after symbolic possession. after that the
bank may want to proceed with selling the particular property. may not want to sell the property
(only want physical possession as they anticipate that the debtor will pay in the future, or bank
may have sold off the property after 13(4)
make a request only to that collector in whose jurisdiction the property is situated. the banks
also decide (forum shop) as to which court will they get immediate and easy possession of the
property. if a collector passes such an order with respect to the property not in his jurisdiction,
remedy to borrower- writ of certiorari in HC to quash the order of the collector on grounds of
illegality that he passed an order not in his power (jurisdiction) has decided on a matter in
which he has no power to decide upon. here it means the forum shopping can be challenged
by sending the enforcement agency to the location of the property along with the authorised
agent of the bank to take possession.
a one page order- that an application has been made, equitible mortgage, is valid, the loan has
been taken by the borrower, who is unable to pay the loan. in light of the same, we order the
SP to go and take possession of the property. after this order is passed, the authorised agent of
the bank makes an application to the SP or the SSP along with this order of the collector to take
possession of the property.
equitable mortgage- that the borrower has created a security interest on these properties.
classifying a loan as an NPA is not a requirement under the RDB act. and also mentioning of
the NPA in the recall notice is not required. the deciding officer of the DRT, will ask you about
the NPA date. so ultimately the NPA is needs to be ascertained. the language of the act does
not particularly mention the NPA
loan recall notice, tht you have been sending notices to the borrower to pay and then you have
now taken such action
NPA classification. that recall notice- general notice has been sent, 90day period over and now
you take this action.
SCN under s13(2) under the RDB, SCN under s.13(2) is not quintessential. but under the
SARFAESI, SCN under s13(2) is essential. under RDB, general notice (recall notice) needed,
thats all.

what about the situation in which application have been made in front of the collector, and he
might not have been able to pass an order within 60days. what to do then? now the secured
creditor is going to the HC to pass a mandamus to direct the collector to pass an order for
possession asap
mandamus might lead to multiplicity of proceedings, mandamus is an option.
even after the delay of 60 days, the HC can still ask the collector to condone the delay. but
under IBC, the HC cannot ask the NCLT to go beyond the delay period of 45 days
once the collector directly takes possession, or his authorised officer or the enforcement agency
goes and takes the physical possession. one part, next part- after the physical possession taken,
then the grievance arises. the 2nd part cannot be challenged before the court i.e., taking of the
physical possession cannot be challenged. filing securitization application, under s17.
two instances- order passed and possession of the property not taken, application for quashing
of the order. can challenge under s.17 SA on merits.
the act mentioned here is the collector +enforcement agency going and taking the possession
of the property, this cannot be challenged.

absurd interpretation to give finality to the ministerial order of the collector.

S.17
order of the collector is challenged before the DRT in SA under s.17 because 14 merely talks
about the physical possession. 13(4) does not make a distinction between symbolic or physical
possession. the right to take possession emanates from 13(4). 14 is only a mechanism to take
physical possession.
on an application filed.
Term sheets: introduction, Practical Law UK Practice Note 9-201-9296

Term sheets: introduction

by Practical Law Finance

Practice notes | Maintained | England, Wales

An introduction to term sheets in the context of lending transactions, including details of what they include and
when they are used. This note also considers the lender's and borrower's perspectives when drafting and negotiating
term sheets.

This note includes links to related resources such as standard form term sheets and commitment letters.

What is a term sheet?

Legally binding and non-legally binding terms

Jurisdictional issues

How can a term sheet be used?

What does a term sheet cover?

Lender's or arranger's perspective on preparing a term sheet
Borrower's perspective
Forms of term sheet

What is a term sheet?

A term sheet (also known as heads of terms) is a document that provides an overview of the key commercial and other terms
of a transaction. In the context of a lending transaction, it sets out the terms on which a lender or group of lenders is willing to
lend to a borrower and is used as a basis for drafting a facility agreement. It may be attached as an appendix to a commitment
letter (which is also called a mandate letter).

The lender or arranger(s) usually prepares a term sheet on the basis of initial discussions with the borrower. However, the term
sheet will usually be negotiated by the borrower. If the facilities are to be syndicated a commitment letter will also usually be
drafted by the arranger(s). Once the term sheet (and, if relevant, the commitment letter) has been agreed, the borrower will have
a certain period of time within which to accept the terms and grant a mandate to the lender or arranger(s).

Occasionally, the term sheet will be prepared by the borrower rather than the lender or arranger(s).

Legally binding and non-legally binding terms

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Term sheets: introduction, Practical Law UK Practice Note 9-201-9296

A term sheet is normally largely non-legally binding. Occasionally, parties sign a legally binding term sheet, usually in
connection with a debt commitment letter. This commits the lender or group of lenders to provide the loan or other facilities
before the finance documents are in agreed form. This is most likely to occur in an acquisition financing.

In relation to a typical non-legally binding term sheet, there are two exceptions that create legally binding obligations between
the parties:

• As a borrower will normally want a binding undertaking in its favour in respect of confidential information that it
provides to the lender during the course of negotiations, such an undertaking will typically be included in the term sheet
(if a separate confidentiality undertaking (or confidentiality agreement) has not already been provided). For an example
of a separate confidentiality agreement to be used in connection with a lending transaction, see Standard document,
Confidentiality agreement: lending.

• A lender or arranger(s) will often insist that the term sheet contains a binding undertaking on the part of the borrower
to pay its or their costs and expenses (including legal fees) incurred in connection with preparing, negotiating, printing,
executing and (if the facilities are syndicated) syndicating the loan or other facilities, whether or not the facility
agreement is signed. This is often referred to as a "drop-dead" fee.

Where certain terms in a term sheet are intended to be binding, the legal requirements for creating a valid contract must be
satisfied in respect of those terms. For more information, see Practice note, Heads of terms in commercial transactions: Are
my heads of terms legally binding?.

Care should be taken that the parties' intention to create (or not create) a contractual or legally binding relationship is reflected
in the documents and any correspondence. Expressing matters as being "subject to contract" may not always be sufficient to
prevent a contract being created inadvertently. For more information, see Practice notes, Contracts: formation: Intention to
create legal relations and Heads of terms in commercial transactions: "Subject to contract".

Jurisdictional issues

"Subject to contract" wording (see Legally binding and non-legally binding terms) is not recognised in many jurisdictions, and
so it should never be relied on without further detail when dealing with non-English parties. Some jurisdictions also impose a
duty to negotiate in good faith (see Practice note, Heads of terms in commercial transactions: European position and duty to
negotiate in good faith). Entering into a term sheet may help to crystallise that duty.

How can a term sheet be used?

In addition to setting out the basic terms of the transaction agreed between the lender and the borrower, the term sheet will
be used:

• By a lender to obtain its internal authorisation (credit committee approval) for the proposed facilities.

• To help the lender's (or facility agent's) solicitors to draft the facility agreement and related finance documents.

• To help the borrower's solicitors in their review the first draft of the facility agreement and related finance documents.

• To alert the borrower to the main conditions precedent that will be required to be satisfied before the facilities are made
available. This gives the borrower more time to satisfy these requirements.

• If the facilities are syndicated, by the proposed syndicate to assess whether to join the transaction.

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Term sheets: introduction, Practical Law UK Practice Note 9-201-9296

For background information on reasons for and against using heads of terms in commercial transactions, see Practice note,
Heads of terms in commercial transactions: Reasons for and against using heads of terms.

What does a term sheet cover?

Generally, a term sheet is widely drafted and includes provisions dealing with:

• The parties (lender(s), arranger(s), facility agent, security trustee, hedging counterparty and obligors).

• Type and amount of the facilities (including any tranching).

• Purpose of the facilities.

• Term, availability period and repayment dates and instalments.

• Pricing (interest, fees and whether hedging is required).

• Prepayment and cancellation.

• Representations and warranties.

• Covenants (information, general and financial).

• Events of default.

• Majority lenders (syndicated facilities only).

• Assignments and transfers by lenders (particularly if the facilities are to be syndicated).

• Conditions precedent (including security documents, if required).

• Miscellaneous provisions (for example, tax gross-up).

• Costs and expenses.

• Confidentiality (if this has not been dealt with separately).

• Governing law and jurisdiction.

Lender's or arranger's perspective on preparing a term sheet

Depending on market conditions and on the particular borrower, the lender or arranger may be in a stronger position than the
borrower to negotiate the terms of proposed facilities and to include provisions favourable to it in the term sheet.

A lender or arranger will also wish to prepare the term sheet so that it is sufficiently detailed:

• For it to obtain credit committee approval.

• To make it difficult for the borrower to negotiate terms that fall outside that credit committee approval.

The term sheet usually includes a statement that its terms are indicative only and do not constitute an offer to finance (or
arrange or both) the facilities. This gives a lender or arranger scope to depart from the term sheet during any later negotiations,

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Term sheets: introduction, Practical Law UK Practice Note 9-201-9296

and should mean that it is not obliged to provide or arrange the facilities even if the borrower agrees the term sheet. This is
particularly important if the lender or arranger has not yet obtained credit committee approval.

The term sheet also usually states that provision of the facilities is subject to due diligence in relation to the borrower, credit
committee approval (if that has not yet been obtained), the terms and conditions of the commitment letter, and satisfactory
documents being entered into. The requirement that documents are satisfactory to the lender or arranger(s) (as appropriate) also
gives it scope to depart from the term sheet during later negotiations.

It will be in the lender's or arranger's interests to keep the term sheet as flexible as possible. For example, it may specify "events
of default shall apply including, but not limited to, the following". This gives it maximum flexibility. The longer and more
detailed a term sheet, the harder it is in practice for the lender or arranger to deviate from its terms. The detailed terms will have
been negotiated between the parties and the borrower will resist any further changes.

A lender or arranger may not wish to include the details of its fees in the term sheet. This may be for reasons of commercial
sensitivity (particularly if the facilities are to be syndicated) or because it prefers to finalise the details of its fee arrangements
during the negotiation of the finance documents and the completion of any due diligence. It is important to ensure that any
formula used for calculating fees is correctly drafted. Lenders (and other finance parties) should be careful when providing any
fee estimates in term sheets and using formulae for calculating fees. In ING Bank NV v Ros Roca SA [2011] EWCA Civ 353, the
Court of Appeal ruled that a bank, having provided an estimate of fees calculated on one basis, was estopped from relying on
the fees clause in a contract to avoid calculating its fees on a revised basis. For more information, see Legal update, Estoppel
forces bank to charge fees in line with their estimate rather than with the contract (Court of Appeal).

Borrower's perspective
The term sheet will be the first clear written indication to the borrower of the basic terms proposed, and the borrower will use it to
decide whether to accept that lender's or arranger's terms or to approach a different lender. Generally, the borrower's negotiating
position is much better at this very early stage of its dealings with potential lenders and it is more likely to obtain key concessions
before signing or otherwise agreeing the term sheet. The borrower should consider all the provisions of the term sheet, and
should be wary of any generic language (such as "The borrower shall provide the usual representations and warranties.").

Forms of term sheet

The Loan Market Association (LMA) has produced, among others, a term sheet for a syndicated multi-currency term and/or
revolving facilities agreement, which its members can access from the LMA website. For more information about the LMA's
mandate and syndication documents for primary documents, see Practice note, Loan Market Association: Primary documents:
mandate and syndication documents.

See also Standard documents:

• Term sheet: bilateral.

• Term sheet: bilateral acquisition finance facilities.

• Term sheet: syndicated.

• Term sheet: syndicated acquisition finance facilities.

• Term sheet: syndicated term loan, pre-export finance facility.

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Term sheets: introduction, Practical Law UK Practice Note 9-201-9296

For standard form commitment letters and related resources, see Practice note, A guide to key resources: general lending:
Commitment letters.

END OF DOCUMENT

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